PESO  FALLS  BACK  TO  2-WEEK  LOW  OF  42:$1

MANILA, DECEMBER 19, 2007
(STAR) By Des Ferriols - The peso weakened against the dollar yesterday as the greenback strengthened against Asian currencies on the back of rising prices in the US that eased expectations of further rate cuts by the Federal Reserve.

The peso fell to as low as 42.08 to the dollar in intraday trade, almost one percent lower than its Monday close before recovering slightly to close at P41.98 to the dollar.

Tagged as the highest yielding currency in the region this year, the peso dropped two percent in the last two sessions, taming its growth so far this year down to 17 percent.

The rise in the prices of goods in the US indicates higher inflation which traders said could mean that the US Federal Reserve Board would be more circumspect about further cuts in its interest rates.

Traders said the peso lost some of its strength against the dollar not so much because of inherent weakness in the currency but more from the gathering strength of the US dollar.

They said the market also expects some banks to book some profits towards the end of the year, indicating that the peso could undergo further correction this week and possibly until the end of the month.

Moreover, traders said remittances from overseas Filipinos have eased somewhat, since the bulk has already come in early in the month in preparation for the holiday season.

With the slowdown in remittances, the rise of the peso against the dollar is expected to be tempered slightly although the market still sees further appreciation down the line.

The drop in the peso came in the heels of official reports that the Arroyo administration might end the year with a balanced budget as the fiscal position in November actually returned a P54.1 billion surplus from the proceeds of the sale of its power asset.

According to market players, the peso will continue correcting in the days to come but the consensus still points to a sustained rise against the dollar as the US economic slowdown unfolds in the first quarter of 2008.

The peso has been appreciating faster than other currencies in the region due to the combined effects of the weakness of the US dollar and the sheer strength of dollar inflows from direct and portfolio investments, exports and remittances from overseas Filipinos.

Despite the retreat, traders said the peso remains as the top currency in Asia, rising strongly since September when the US Fed cut its policy rates by 50 basis points.


Chief News Editor: Sol Jose Vanzi

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