PESO FALLS ON STRONG CORPORATE DEMAND
MANILA, March 9, 2006 (STAR) By Ted P. Torres - The peso retreated sharply against the dollar yesterday on strong corporate demand for the greenback.
At the Philippine Dealing System (PDS), the peso tumbled by 36 centavos to close at the day’s low of 51.42 from Tuesday’s close of 51.06 to the dollar.
"There’s some corporate dollar demand that just came in, weakening the peso," said Jonathan Ravelas, a bond and currency strategist at Banco de Oro. "It’s probably some quarter-end requirement from importers since the peso rose past 51."
On Tuesday, the peso rose past 51 for the first time in three-and-a- half years on speculation the Bangko Sentral ng Pilipinas (BSP) would raise interest rates to curb inflation running at the fastest pace in eight months. It gave up the rally toward the close of trading.
At yesterday’s trading, the peso opened weak at 51.20 before hitting a low of 51.42 to the dollar. Trading volume was heavy at $613.50 million.
The peso’s appreciation lowers the cost of goods purchased overseas and dollar-debt payments for Philippine companies.
Imports rose in December at the fastest pace in almost three years, growing 21.7 percent from a year ago to $3.97 billion, after climbing 1.4 percent in November, the National Statistics Office (NSO) said.
The country imports almost all its crude oil, which is priced in dollars.
Meanwhile, the country’s chief economic planner is urging the Bangko Sentral ng Pilipinas (BSP) not to allow the peso to appreciate beyond the 50 to $1 level.
"The BSP should intervene if the peso continues to appreciate beyond 50 to $1," Socio-Economic Planning Secretary and National Economic and Development Authority NEDA director general Romulo L. Neri said.
The BSP, he said, should buy enough dollars to keep the peso "at bay" although this may cause a slight but manageable liquidity problem.
Philippine exporters are complaining that they are becoming uncompetitive in the world market with a stronger peso.
"That is particularly true with exporters with a high level of local content," Neri said.
The price range of between 50 to 51 to the dollar is a "comfortable" level for the country’s exporters, while taking into account the positive impact of a stronger peso to other segments of society and the National Government, Neri said.
Among the exports with high local content are copra-based, handicrafts, fruits and processed fruits, coconut-based, and furniture.
But he pointed out that one of the good points of a stronger peso is that it keeps import-based products reaching inflationary levels.
Every P1 appreciation in the exchange rate can result in savings of up to P2.222 billion for the National Government in terms of interest payments of debt, and P2.14.7 billion in principal payments, based on estimates of the Bureau of Treasury (BTr).
It likewise estimated that a strong peso would cushion the impact of rising oil prices.
Chief News Editor: Sol Jose Vanzi
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