P49.76 to a dollar

PHILIPPINE NEWS SERVICE — THE peso climbed to a four-year high against the dollar yesterday, moving some companies to prepay some of their dollar loans to take advantage of its strength, an official said.

The unit hit P49.76 against the dollar—its strongest showing since May 24, 2002, when it soared to P49.74—even as foreign investors flocked to the stock market in search of higher yields.

“The peso gained primarily because of [increasing] portfolio investments and remittances [from Filipinos working abroad],” central bank Gov. Amando Tetangco Jr. said.

The unit opened at P49.85, three centavos stronger than Thursday’s close of P49.88, and hit P49.76 in early afternoon trading before the central bank started buying dollars to temper its rise. It then closed at P49.82, its highest finish since May 22, 2002, when it closed at P49.79. It averaged 49.797 against the dollar.

A total of $722.51 million was traded. That was nearly double Thursday’s volume of $389.26 million, but dealers said the central bank likely bought $200 million of the total to stop the peso’s rise.

Tetangco said the strong peso was encouraging companies with foreign loans to settle them in advance, which was what the central bank was doing.

He said the Monetary Board, the central bank’s policy-making body, approved the prepayment of “a few hundred” million dollars by “a few” companies.

In theory at least, the dollars sent out to prepay the debts would bring down its supply here and stop the peso’s rise. Economists say a strong peso is good for the economy but not for exporters [whose goods become more expensive] or for Filipinos overseas [who get fewer pesos for their dollars].

The Bangko Sentral does not want to see the peso rising too fast, and traders said its announcement that it intended to increase banks’ dollar holdings was calculated to have that effect.

“This is the time to buy dollars and this is the time to turn the tide,” said Jonathan Ravelas, chief market strategist at Banco de Oro universal bank.

“The appreciation of the peso raises concerns including less spending for [migrant workers’] beneficiaries and narrowing exporters’ margins,” he said.

“The peso’s appreciation is penalizing them.”

Standard Chartered economist Frances Cheung sees the peso hitting P48.50 by the first quarter next year. But ING’s Tim Condon said he would be cautious on the currency in case the central bank eased its monetary policy.

“We forecast a 25 basis point cut in the [central bank’s] policy rate [in] December,” Condon said.

Traders said a rate cut would weaken the peso, and many were betting on a rate cut soon.