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2nd February 2005, 23:46
THE PESO closed at a fresh 15-month high against the US dollar on Tuesday, with the rally fuelled by a continuing influx of foreign funds and positive economic data, dealers said.
The peso jumped to the 54-to-the-dollar territory early in the trading session, but a correction set in later on caution ahead of a two-day meeting of the US Federal Reserve's policy-making body later Tuesday, they said. The peso closed Tuesday at 55.00 to the dollar, after trading at a high of 54.87, on hefty volume of 454.5 million dollars. This was its best finish since October 21, 2003, when it ended at 54.79 to the dollar. The closing rate on Monday was 55.09 pesos to the dollar.
"There's a wealth of good news that made the Philippines a buy," AB Capital Securities research director Jose Vistan Jr. said.
a dealer at a local commercial bank said: "We are seeing more inflows, while oil companies are not buying dollars at the moment. Importers are also not hedging and exporters are not selling dollars. "And there is more positive economic news for the market to digest."
In a television interview, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Amado Tetangco said upbeat news supported the peso's continuing rally but added that its strength could be sustained only if the Congress passed more revenue measures.
President Gloria Macapagal-Arroyo recently signed into law the Lateral Attrition Bill, which will penalize government revenue collection agencies who fail to meet their targets and reward those that meet their revenue goals.
A bill seeking a two-percentage point increase in the 10-percent value-added tax (VAT) has been passed by the House of Representatives and remains pending at the Senate.
The California Public Employees' Retirement System (CalPERS), the biggest pension fund in the United States, has kept the Philippines on its list of permissible investment destinations, the Philippine ambassador to the US, Albert del Rosario, said earlier.
The decision came after CalPERS's consultant, Wilshire Associates, gave the Philippines a passing score in its evaluation of the country's political and economic situation, Del Rosario said.
CalPERS has a modest 85 million dollars in portfolio investments in the Philippines, but its influence lies in that many international investors follow its lead.
Also affecting the currency market is a sharp drop in Treasury bill rates on Monday, with tenders surging after the government cut the fortnightly offer size to 12 billion pesos from 15 billion.
Also on Monday, the government announced that the economy in terms of the gross domestic product grew 6.1 percent in 2004, the fastest expansion seen in more than a decade, thanks largely to a vibrant services sector led by telecommunications and robust agricultural output.
"I think there's still room for the peso to appreciate given the positive economic outlook, although we can expect a correction along the way," said Jonathan Ravelas, market strategist at Banco de Oro Universal Bank.
Dealers and the central bank itself are not ruling out the peso rising to 53 to the dollar in the near term, especially if the government is able to deliver on its promised fiscal reforms.
Governor Rafael Buenaventura of the central bank has repeatedly said that an increase of 0.25 percentage point in the US Federal Reserve's key interest rate this week is unlikely to prompt the Philippine monetary authority to adjust its key rates as well.
The central bank's closely watched overnight interest rates have been steady at 6.75 percent for borrowing and 9.00 percent for lending since mid-2003, despite a series of rate hikes by the US Federal Reserve over the past few months.
The peso jumped to the 54-to-the-dollar territory early in the trading session, but a correction set in later on caution ahead of a two-day meeting of the US Federal Reserve's policy-making body later Tuesday, they said. The peso closed Tuesday at 55.00 to the dollar, after trading at a high of 54.87, on hefty volume of 454.5 million dollars. This was its best finish since October 21, 2003, when it ended at 54.79 to the dollar. The closing rate on Monday was 55.09 pesos to the dollar.
"There's a wealth of good news that made the Philippines a buy," AB Capital Securities research director Jose Vistan Jr. said.
a dealer at a local commercial bank said: "We are seeing more inflows, while oil companies are not buying dollars at the moment. Importers are also not hedging and exporters are not selling dollars. "And there is more positive economic news for the market to digest."
In a television interview, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Amado Tetangco said upbeat news supported the peso's continuing rally but added that its strength could be sustained only if the Congress passed more revenue measures.
President Gloria Macapagal-Arroyo recently signed into law the Lateral Attrition Bill, which will penalize government revenue collection agencies who fail to meet their targets and reward those that meet their revenue goals.
A bill seeking a two-percentage point increase in the 10-percent value-added tax (VAT) has been passed by the House of Representatives and remains pending at the Senate.
The California Public Employees' Retirement System (CalPERS), the biggest pension fund in the United States, has kept the Philippines on its list of permissible investment destinations, the Philippine ambassador to the US, Albert del Rosario, said earlier.
The decision came after CalPERS's consultant, Wilshire Associates, gave the Philippines a passing score in its evaluation of the country's political and economic situation, Del Rosario said.
CalPERS has a modest 85 million dollars in portfolio investments in the Philippines, but its influence lies in that many international investors follow its lead.
Also affecting the currency market is a sharp drop in Treasury bill rates on Monday, with tenders surging after the government cut the fortnightly offer size to 12 billion pesos from 15 billion.
Also on Monday, the government announced that the economy in terms of the gross domestic product grew 6.1 percent in 2004, the fastest expansion seen in more than a decade, thanks largely to a vibrant services sector led by telecommunications and robust agricultural output.
"I think there's still room for the peso to appreciate given the positive economic outlook, although we can expect a correction along the way," said Jonathan Ravelas, market strategist at Banco de Oro Universal Bank.
Dealers and the central bank itself are not ruling out the peso rising to 53 to the dollar in the near term, especially if the government is able to deliver on its promised fiscal reforms.
Governor Rafael Buenaventura of the central bank has repeatedly said that an increase of 0.25 percentage point in the US Federal Reserve's key interest rate this week is unlikely to prompt the Philippine monetary authority to adjust its key rates as well.
The central bank's closely watched overnight interest rates have been steady at 6.75 percent for borrowing and 9.00 percent for lending since mid-2003, despite a series of rate hikes by the US Federal Reserve over the past few months.