PESO SURGES TO 7-YEAR HIGH OF 45.245 AGAINST US$
MANILA, JULY 18, 2007 (STAR) By Des Ferriols - The peso soared yesterday to its highest level in seven years, hitting an intra day high of 45.245 to a dollar on the back of strong surges in foreign investment inflows into the stock market.
At the Philippine Dealing System (PDS), the peso closed 30 centavos higher at 45.250 from Monday’s close of 45.550 to $1.
The peso has been steadily rising against the weakening dollar as the equities market churned heavily with the excitement over the initial public offering (IPO) of Aboitiz Power Corp.
The strength of the peso was bolstered even more by the general weakness of the dollar which stayed near record lows against the euro because of worries over the subprime mortgage sector and Fed chairman Ben Bernanke’s monetary policy testimony to the US Congress.
The peso opened at 45.450 to the dollar and promptly went skyrocketing to its highest level since September 2000 before closing at 45.250 to $1.
“The market is looking for the 45.60 level to hold yesterday,” said one trader.
“But I think there are still inflows from various sources coming into the system. Several IPOs are slated for this month.”
Traders said that aside from external factors, the market is expecting more inflows into equities since several IPOs are scheduled in the coming weeks, luring heavy foreign portfolio investments into the country.
Aboitiz alone was able to raise $221 million while GMA Network Inc. is targeting to raise $170 million when it launches its own IPO.
Property developer Vista Land & Lifescapes is likewise scheduled to launch its secondary share issue of about $459 million.
According to traders, the market also had a positive reaction to the move of the Bangko Sentral ng Pilipinas (BSP) to cut its headline policy rates and remove the tiering scheme on bank placements with the central bank.
Even late in the afternoon, traders said they did not see the BSP intervening, an indication that monetary officials might have decided to be more tolerant of the appreciation of the peso since there were real reasons that underpinned its rapid appreciation.
BSP Governor Amando M. Tetangco, Jr. said earlier it was possible for the peso to average between 47 and 48 to the dollar in 2007.
Tetangco told reporters that the foreign exchange rate was already moving in the 47-48 range although he ruled out the possibility that the peso could go up to as high as 46-47 to the dollar.
“It does appear that the peso is going in that direction,” Tetangco said. “We started the year looking at 48 to 49 to the dollar but its possible that the average for the year would be 47-48.”
From year to date, the peso has appreciated by 5.8 percent and since the balance of payments (BOP) is projected to yield an even bigger surplus than expected, Tetangco said it could fuel the tendency for a stronger peso.
“The peso itself is up but the other side of that is the weak dollar against all other currencies,” Tetangco said.
“Whenever your BOP is in surplus, the tendency is to build up strength in the domestic currency,” he said. “That’s a natural behavior.”
The BSP said it expected the country’s balance of payments surplus to hit nearly $3 billion this year, with the emerging international reserves now at $26 to $26.6 billion.
Chief News Editor: Sol Jose Vanzi
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