At the foreign exchange market of the Philippine Dealing and Exchange Corp., the peso rose to its highest level in seven years against the US dollar yesterday with the currency’s strength seen as a potential problem for the economy, particularly the export sector.

The peso soared to a new seven-year high, closing at P44.35, from P44.75 to the US dollar last Friday, fuelled by strong remittances ahead of the enrollment for the second semester, continued weakness of the dollar, and sustained inflows in the high-riding stock market.

The last time the peso came near to this rate was nearly 86 weeks ago on closing at P44.305. Currency dealers projected the peso to test new levels today.

Dealers said investor sentiment at the stock market was also boosted by Wall Street’s gains Friday after a better-than-forecast jobs report for September eased fears the world’s largest economy is headed for a recession.

The composite index closed up 97.59 points at 3,873.50, after setting a new trading high of 3,896.74, up 82.08 points from the last peak at 3,791.42 posted last July 5. It also marked the 12th time this year that the PSEi has set a new record high since May 18, 2007 when it first broke the old record of 3,447.6 points that earlier stood unchallenged for over 10 years.

Philippine Stock Exchange President Francis Ed. Lim said that the "record-breaking performance is a clear indication that our market stands on solid ground."

He said that "measures to plug government’s budget deficit and induce a drop in interest and inflation rates, along with reforms from within the PSE, have helped a lot in improving our appeal to investors. All these favorable factors explain why our market also has noted a dramatic increase in value turnover, which now averages P5.45 billion a day from P2.32 billion last year. I thank the government for its support in enhancing our market’s growth. We in the PSE believe that we can further accelerate our market’s advance, if we can put in place a more enabling business environment."

"It was an incredible breakout," said Jose Vistan of research director at AB Capital Securities.

"It seemed like the local market reacted more favourably than the Dow did after the US jobs data for September came out.

"That’s because foreign funds are coming into emerging markets, it sent a message that the coast is clear — with recession concerns not as bad as originally thought," he said.

Trading at the foreign exchange market was intense with sellers of dollars overtaking the buyers largely on the account of the huge inflows from overseas Filipino workers (OFWs) over the weekend. At one point during the trade.

Despite the "sporadic attempts" of the monetary authority to temper its rapid appreciation, unloading dollars into the market at a rate of P44.55, which was the intra-day low, the peso emerged stronger.

"The BSP (Bangko Sentral ng Pilipinas) was understandably present in the spot to slowdown the appreciation. But, they have to abandon their stance as dollars continue to flood the market," a bank treasury official observed.

Roland Avante, executive vice president of Chinatrust Philippines, on the other hand, cited the "continued weakness of the dollars" due to the protracted and lingering effects of the turmoil in the subprime mortgage market in the US was one contributing triggers to the peso’s climb.

"The weakness of the dollar, accordingly, pushed all regional currencies up," Avante said.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor for monetary stability Diwa Guinigundo, meanwhile, identified the "strong sentiments" on the Philippine economy by offshore fund managers and investors because of the stability in macroeconomic fundamentals as among the drivers.