MANILA, APRIL 11, 2007 (STAR) By Des Ferriols - The peso broke into the 47-to-$1 territory yesterday, surging to its highest level in more than six years at 47.950 due to a build-up of inflows over the long Lenten holiday.

After the long pause over the five-day holiday, the peso opened strong at 48 to $1 backed by a strong volume as $126.5 million worth of currency changed hands within half an hour of the day’s session.

Yesterday’s turnover, however, surprised no one as pent-up energy poured into the bond and equities market, heavily supported by strong inflows from overseas Filipino workers (OFWs).

Combined with very little corporate demand for the greenback, the peso went on to break into the 47-to-$1 mark and strengthened further to 47.940 at mid-morning before finally closing at a new six-year high of 47.950 to the dollar.

The peso last touched the 47.90 territory when it closed at 47.91 to the dollar on March 8, 2000.

"The peso’s movement yesterday was due in part to the supply of dollars accumulated over the long weekend from remittances and portfolio investments," said Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr.

According to Tetangco, the peso broke into P47 level as market players expected strong dollar sales following last week’s price action. Tetangco said inflows from OFWs were also heavy, adding to the peso’s momentum which was already on the upward swing because of significant inflows into Philippine bonds and equities.

Dealers said that a strong break of the 48 level would lead the market to test the 47.50 to $1 territories after the currency closed at 48.05 to the dollar on the last trading day before the Holy Week break.

Market analysts said the strength of the country’s economic outlook was expected to open the gates for more than double the foreign investments in local equities compared to last year.

Foreign exchange inflows have caused jitters among monetary authorities but the BSP was itself steadfast on keeping all its monetary policy settings unchanged despite market speculations.

The BSP said that despite the perceived loss of competitiveness of the peso against other currencies in the region, its appreciation against the dollar was actually just at par with the rest of Southeast Asia.

Tetangco said there was fundamental support for the currency despite the gyrations in the regional markets.

"The underlying fundamentals of our economy have not changed and continue to be sound," Tetangco said. "So these will provide support for the peso."

According to Tetangco, the country’s balance of payments (BOP) position, for example, remained strongly in the surplus zone, removing the danger that monetary officials would not have the resources to smoothen the volatility of the currency.

Tetangco also downplayed fears that the BSP’s move to liberalize its foreign exchange rules would aggravate the weakness of the peso when it takes effect in April.

Chief News Editor: Sol Jose Vanzi

All rights reserved