Peso continues advance vs US dollar

PHILIPPINE NEWS SERVICE — The peso yesterday surged to another near six-year high against the US dollar as heavy remittance flows and foreign portfolio investments outweighed thin corporate demand.

The peso opened at 49.28 against the dollar, unchanged from Friday’s close, and rose to a high of 49.185. Dollar remittances piled up with the long holiday, resulting in an oversupply and boosting the peso.

The peso closed at 49.195 against the dollar, its strongest close since March 27, 2001 when it edged at 49.165.

Volume turnover stood at $325 million from Friday’s level $245.9 million, with the peso averaging at 49.212 against the greenback.

“The positive sentiment on the peso continued. The market was relatively thin. The scant corporate demand was more than met by the inflows from remittances and exporter sales accumulated during the weekend,” central bank Gov. Amando Tetangco Jr. said in a mobile phone text message to reporters.

HSBC Philippines treasurer Jose Arnulfo Veloso said the peso might continue to strengthen because of the usually weak corporate demand seen in the beginning of the year.

Traders said the peso would continue to test new highs. A trader from a local bank said he was looking at the 49.15:$1 level as remittances from Filipino migrant workers continue to trickle well into January. Another trader said he expected to peso to hit the 49:$1 level because of foreign direct investment flows to Philippine Long Distance Telephone Co. NTT DoCoMo of Japan has acquired an additional stake in PLDT.

The government is looking at an exchange rate of 50 to 52 against the dollar this year but most banks expect the peso to settle between 47 and 49 because of expectations of heavy remittance flows, foreign direct and portfolio investments.

Positive investor sentiment has also buoyed the peso in recent days following the country’s good fiscal and economic performance.

The central bank last week reported that the country’s external debt dropped by 2.6 percent at the end of September to $54.1 billion from $55.5 billion a year ago.

It also reported that foreign currency deposit unit deposits rose to $17.862 billion from $15.79 billion a year ago, reflecting the increase in remittances.

A foreign currency deposit unit is a unit of a local bank or of a local branch of a foreign bank authorized by the Bangko Sentral to engage in foreign exchange denominated transactions, such as accepting foreign currency deposits and granting of foreign currency loans.