BSP  NOT  CAPPING  PESO  RISE:  EXPORTERS  TOLD  TO  ADJUST  AS  PESO  HITS  45

MANILA, MAY 23, 2007
(MALAYA) By MAX ESTAYO - The peso yesterday surged to 45.82 to the US dollar, its highest level in nearly seven years and the Bangko Sentral ng Pilipinas will let the currency rise and has advised exporters to adjust.

The peso closed at 45.87 to the dollar, up from Monday’s 46.31. Total turnover breached the $1-billion mark, reaching $1002.08, from $971.85 million Monday.

The peso soared, bucking expectations of a technical correction, amidst fresh flows of foreign capital.

Traders said the local unit rose with the regional currencies, which benefited from the positive sentiment on the yuan.

Bangko Sentral ng Pilipinas deputy governor Diwa Guinigundo said "global and local capital surge" was clearly supporting the peso.

Traders said investors were back in emerging markets. Appetite for Asia was more than ample, especially after Chinese monetary authorities widened the yuan’s trading band.

"We will just allow the market forces determine the exchange-rate level," Guinigundo said.

"The peso continues to strengthen but relative to other regional currencies, the Indonesian rupiah and Thai baht, we remain competitive," BSP governor Amando Tetangco Jr. said.

"The challenge is for the affected sectors to make the necessary adjustments," Tetangco added, referring to exporters who are hurting from the dollar’s weakening.

Guinigundo said exporters should learn to hedge, to protect against losses from changes in the foreign-exchange rate.

"They can do forwards, with the help of universal and commercial banks with derivatives license," Guinigundo said.

He said exporters have been forewarned of possible steep appreciation in the exchange rate and should have taken a move.

"The surge of capital will continue on account strong macro fundamentals. The market sentiment remains very positive. We’re seeing very good exports, plus high remittances and foreign investments," Guinigundo said

Traders said the peso would be on a freefall after crossing into the 45 level.

"The next support level is rather deep, 45.50. If this is breached, it could go all the way down to 44.70," Ayes said.

Ayes said the peso was ripe for correction but the strong flows were making the currency resistant.

"It may correct at 47-47.50, then rise again, to 45.50," Ayes said.

With all good news out, Ayes said only demand could trigger the correction.

"As of now there is no demand for dollars, but we expect to see it picking up by June or July," Ayes said.

Guinigundo said the "strong peso" is good for "inflation management" but said it would not necessarily lead to lower inflation.

Inflation may have bottomed out, Guinigundo said, and may not fall further than the 2.3 percent seen in April.

"It’s possible inflation rate could stabilize at this level or go on upward drift, but still expected within the inflation outlook forecasted by BSP," he said.


Chief News Editor: Sol Jose Vanzi

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