PESO CLOSES AT 48.91 TO THE DOLLAR ON STRONG REMITTANCES
MANILA, JANUARY 3, 2007 (STAR) By Des Ferriols - The peso reached its highest level in almost six years and breached yesterday the 48 to a dollar mark, fueled by surging remittances from overseas Filipino workers combined with strong foreign investments in Philippine stocks.
The peso opened strong at 48.95 to the dollar as the market reopened after the long New Year weekend and closed by the end of the day at P48.915 to the dollar, compared with the Friday close of P49.05 to the dollar. The peso was pegged at P48.63 to a dollar on March 21, 2001.
Dealers and monetary officials alike, however, were not surprised by the sustained vigor of the peso against the dollar since the market opened the year with levels of optimism not seen since the economic boom before the 1997 financial crisis.
Central bank governor Amando Tetangco said the strength of the peso was only to be expected, given the country’s solid fundamentals, particularly the sustained decline in inflation rate.
"Add to that the improved fiscal performance of the national government and the steady growth of the real economic sector," he said.
"Naturally, that shored up investor confidence, which has helped support the peso."
Tetangco said with these sustained positive factors it was not surprising to see the peso remaining strong in 2007 especially since the outlook for the country’s balance of payments (BOP) surplus was still high.
"We also have to watch what happens to the US dollar since that would influence the peso," he said, referring to the intermittent weakness of the US dollar against most currencies.
Traders, on the other hand, said the peso was not expected to correct until the second quarter as the country inches closer to the midterm elections in May.
With the deficit expected to drop to P63 billion this year and possibly even lower, credit rating agencies have remarkable success in pressuring the government to address its debt ratio, which had remained worrisome to investors.
Towards the end of 2006, however, the government paid a number of its most expensive obligations, including the last $220 million that it still owed the International Monetary Fund (IMF).
This last move, according to traders, fueled even more enthusiasm among investors, vastly improving their outlook for 2007 where Philippine investments were concerned.
Strong investment inflows, remittances from overseas Filipino workers and various income from abroad were expected to support a strong international reserve.
Export earnings were more dependent on the global market which has been on the brink of a generalized slowdown but Tetangco said even this should not be a problem considering the country’s growing trade relations with economies in the region that were largely unaffected by the global trend.
Chief News Editor: Sol Jose Vanzi
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