Peso surges to 47.365:$1; reserves hit $25b in April

PHILIPPINE NEWS SERVICE — The peso yesterday surged to a new six-and-a-half-year high against the US dollar supported by a string of positive news on the domestic front and prospects of a weaker dollar.

The peso closed at 47.365 against the dollar, its strongest close since Oct. 11, 2000 when it hit a high of 47 and edged at 47.315.

The peso opened trading at 47.41, up from Friday’s close of 47.46, and rose to a high of 47.345 against the dollar.

It traded within an 8.5-centavo range, averaging at 47.371 at a volume turnover of $682.23 million, up from Friday’s $585.6 million. Traders said a break of the 47:$1 mark would take the peso to new highs.

Traders said the comments of Bangko Sentral ng Pilipinas Gov. Amando Tetangco Jr. in Japan about the beneficial effects of a strong peso on the Philippine economy supported the local currency. A string of positive domestic good news, including an increase in the country’s foreign currency reserves to new highs and the planned $1-billion investment of Texas Instruments, also boosted the peso.

Dollars, gold and other foreign currency held by the central bank climbed to a new all-time high of $25.026 billion at the end of April because of the steady inflow of remittances and robust investment flows.

The gross international reserves are now enough to pay for 4.7 months worth of the country’s imports and more than 2.6 times its maturing short-term debt.

In a statement, the central bank attributed the increase in its reserves to its “foreign exchange operations and income from investments abroad,” negating the pre-payment of foreign loans.

With the peso closing near its high, traders said the momentum was still there for a continued appreciation.

“Everybody was on the offer side which indicates that we still see the peso appreciating. The central bank was buying and it was capping the peso’s appreciation,” a trader from a local bank said.

Another trader said the weak job data in the US released Friday pointed to possible rate cuts that could weaken the dollar and strengthen regional currencies.

“Investor interest is still there and the stock market was up. It’s really the fundamentals still driving the economy,” another trader said.