PESO CONTINUES TO GAIN AGAINST DOLLAR
MANILA, October 27, 2005 (STAR) By Rocel C. Felix - The peso broke past the psychological barrier of 55 to a dollar yesterday, hitting a high of 54.960 during intraday trading on the back of strong dollar inflows from overseas Filipino workers and lack of corporate demand for the greenback.
Yesterday’s close was 25.20 centavos higher than Tuesday’s close of 55.460 to $1. Total volume traded was heavy at $559 million on an average rate of 55.059.
"The sustained increase in remittances in the fourth quarter will support the value of the peso," Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said yesterday. "We think the peso can strengthen further."
Record-high foreign exchange reserves of $18.59 billion last month and the scheduled implementation of an expanded value-added tax law next month have also buoyed the peso, he added.
Tetangco said cash transfers by overseas Filipino should reach $10.3 billion this year.
For the first eight months of the year, OFW remittances hit $7 billion.
Foreign direct investments are expected to rise to $900 million this year from $499 million as of end-July, and further to $1.2 billion next year as investors look past prevailing political concerns, Tetangco said.
Also contributing to the peso’s strength is the absence of corporate demand for the greenback with most companies already hedging on their commercial requirements.
Moreover, the conversion of dollars to pesos is also boosting the local currency as traders take advantage of interest rate differentials.
"The market is really favoring the peso because of higher interest rates," traders said.
Other traders said the market also responded to the earlier statement of Tetangco that the peso could still appreciate in the coming weeks, mainly due to the anticipated sustained dollar inflows from overseas workers.
Moreover, the balance of payments surplus continues to accumulate and the gross international reserves of the country are expected to top the $17 billion target for the year.
The BSP noted that about $3 billion of remittances from OFWs did not go through the formal banking system. This amount is on top of the BSP estimated actual fund transfers of $10.3 billion by the end of 2005 from OFWs.
There are about six million OFWs and migrants deployed abroad whose level of remittances are increasing yearly. These consist of caregivers and health workers, seafarers, service staff, professional/technical workers and production related workers.
Chief News Editor: Sol Jose Vanzi
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