The peso closed at a historic low of P56.35 to the US dollar yesterday amid heightened campaign jitters and central bank’s non-committal stance to help the local currency.
The peso, with a weighted average of
P56.32 opened weak at P56.28 on early volume of $109 million and closed at a high with $195 million.
Apparently alarmed over the weakness of the peso, President Gloria Macapagal Arroyo has scheduled a meeting with the officials of the Bangko Sentral ng Pilipinas (BSP) and the Department of Finance (DoF) on Monday in efforts to save the falling local currency.
She expressed confidence the peso will recover soon, stressing that the government has the capacity to arrest speculative attacks on the peso.
Foreign exchange traders are optimistic that since the peso improved mid-day to
P56.26 there is room for a downside movement or strength against the US dollar when it opens Monday.
Bangko Sentral ng Pilipinas governor Rafael Buenaventura brushed aside concerns of further declines and doused any possibility of adjusting monetary policies to avert depreciation. "Everything we do now is dictated by speculations and rumors to the point that we are distracted. What’s happening to the peso is not a volatility concern," he said.
Buenaventura said foreign exchange markets are faced with a lot of political noises right now, which speculators "would have to live with." Remittances are also at a low and OFW dollars are expected to come back around April to May. "The peso-dollar market is demand and supply driven so we’re bound to speculate."
On interest rate issues, he said "we will keep our options open." He added, "the way I look at it after everything is done and we have executed an orderly election and a new president is installed then there will be a renewal of confidence. The problem right now is too many unknowns and we fear what we don’t know."
Buenaventura added that traders are trying to hedge now in the event that the dollar goes further up, while watching interest rates direction, which was left unchanged at 6.750 for overnight borrowing and nine percent for overnight lending.
A trader from a local commercial bank said the peso is weak on consensus that 64year-old movie actor and political novice Fernando Poe Jr. could win. "The possibility of FPJ winning is affecting our peso and the fact that the MB (Monetary Board) did not do anything to help it has aggravated the situation."
Another bank trader said demand for dollar is now mostly documented and legitimate based on the rates in the parallel markets. "The black market is doing pretty much the same levels right now compared to earlier when they were trading at a premium and higher level than us."
Both currency dealers interviewed said so far the market attitude is "go for the safer alternative. "The peso will continue to slide if it seems that FPJ will win. The market will begin to react positively if either Roco and Lacson improves their election standing," the trader said.
