Peso continues to drop, closes at 41.075:$1

The peso continued to weaken yesterday, breaching the psychological 41 to the dollar barrier to close at 41.075 , eight centavos lower than Wednesday's close of 40.995 to the dollar.

At the Philippine Dealing System (PDS), the peso deteriorated to an intra day low of 41.090 to end with a weighted average rate of 41.063 to the dollar.

However, Bangko Sentral ng Pilipinas (BSP) Gov. Rafael B. Buenaventura and Finance Secretary Jose T. Pardo were not bothered by the continued depreciation of the peso, saying that the depreciation is "temporary and not noticeable."

Buenaventura said the strong demand for dollars is probably due to a maturing $100-million euro note floated two years ago.

"Once that demand has been met the peso will again appreciate nearer to the 40 to the dollar level," he said.

Buenaventura gave assurance that the continued depreciation of the peso will not convince the BSP to jack up its overnight rates, a move which has the tendency to siphon off funds from the foreign exchange market.

Pardo agreed that there is no need to increase interest rates. "The decline (in peso) is not even noticeable," Pardo said.

Buenaventura also cited that regional movements of other currencies such as the Thai baht and the Malaysian ringgit also affected the sentiment against the peso.

Both, however, could not explain why the inflows from some investments such as PLDT, the Ayala Group and even the government's Global bond float have not helped improve the value of the peso.

Earlier, Buenaventura and Pardo assured that the peso will gain strength with the number of dollar inflows expected to come in.