Dealers now expect the local currency, which has ended stronger for a seventh consecutive session, to take a breather.

An official announcement that the government will increase the value-added-tax rate today fueled the strengthening of the peso, traders said.

The dollar closed at R52.170 on the Philippine Dealing System, the lowest finish since ending at R52.110 on May 15, 2003.

The peso is being buoyed by anticipated investment inflows from public offerings of Philippine power producer First Gen Corp. and food manufacturer Universal Robina Corp., dealers said.

They said the VAT hike further improved market sentiment, although some believe the new fiscal measure has already been priced in. The government said it will increase the VAT rate to 12% Wednesday from 10 percent to boost its revenues and narrow its budget deficit.

After the dollar convincingly breached its R52.250 support yesterday, the next target is the key psychological support of R52.000, dealers said.

"The market will probably take a breather. The dollar is oversold at these levels," said a trader. (Dow Jones)

The market is now closely watching whether the good prospects for the economy and the fiscal sector this year will prompt international credit rating agencies to upgrade the sovereign’s BB-/BB/B1 credit ratings or at least revise the outlook on these ratings to positive in the coming months.

Some traders said Bangko Sentral ng Pilipinas likely bought around million at R52.15-R52.20 in early trading to slow the dollar’s fall. The market had mixed views on whether the bank reentered the market in afternoon trading.

Bangko Sentral ng Pilipinasofficials weren’t immediately available to comment on their suspected intervention Tuesday. But they have said in the past that the authority steps in to smooth out foreign exchange volatility in the foreign exchange market if needed.

In the secondary market for Philippine treasury bonds, yields were down on the implementation of the VAT rate hike. The five-year t-bond yield was quoted at 8.975% compared with Monday’s 9.014%, according to the Money Market Association of the Philippines. (Dow Jones)