Peso breaches 51 to $1

The peso careened yesterday past the 51 to the dollar barrier even after the Bangko Sentral ng Pilipinas (BSP) imposed on Thursday stiff measures to prevent banks from speculating on the embattled peso.

Traders said the peso’s unstoppable drop was due mainly to the deepening political crisis over corruption allegations against President Estrada.

The peso, which has declined by more than 20 percent against the dollar this year, hit a record low of 51.400 yesterday before closing at 51.080 to the dollar, down 68 centavos from Thursday’s close of 50.400 to $1.

Transactions ranged from a high of 50.900 to a low of 51.400 to settle at a weighted average rate of 51.015 to the dollar.

Total volume traded amounted to only $46 million, indicating that dollar supply was tight and that even a small transaction was able to bring down the value of the peso.

The BSP is believed to have sold around $15 million at 50.950 to $1 in an attempt to prevent the 51 level from being breached.

BSP Governor Rafael B. Buenaventura said the authority may provide dollar liquidity, but did not comment on whether the BSP had already been in the market.

Traders said the market also reacted negatively to moves by the BSP to tighten reporting requirements on the currency transactions of the foreign-exchange corporations of bank subsidiaries and affiliates.

The move is being regarded in some quarters as capital control–something the BSP has vigorously denied.

"This is mainly now a political problem and it is difficult for the BSP actually to come up with a response," said Steve Brice, a treasury economist with Standard Chartered Bank.

Traders said there may be very little that the BSP can do to stop the peso’s fall. "Even if the BSP is again forced to use interest rates, it may not have the desired effect of stopping the fall of the peso," they said.

Only a clear resolution of the current political situation, forex dealers said, would have a definitive effect on the forex rate.

"It’s anybody’s guess where the peso is going," traders said, adding that if the peso keeps on shedding even an average of 50 centavos a day, the currency will just keep on crashing through any projection.

The only loser, traders admit, will be the government which could end up seriously depleting its international reserves.

Buenaventura reported that the country’s gross international reserves was still at a healthy $14.5 billion as of Oct. 25.

In another development, President Estrada convened yesterday at Malacanang his key advisers in the Economic Coordinating Council (ECC) .

"We are trying our best how we can best solve the economic crisis. That is why I am asking the help of everyone who can help because the people who would really be affected by all these things are our poor people, " Mr. Estrada said.

The President discussed with the ECC the proposed monetary measures to stem the peso’s drop.

"Nobody wants that to happen but we’re trying our best. Let’s hope the peso will gain back its strength. We will not give up," the President vowed.

"But the opposition keeps blaming me for all of these. All accusations were being thrown at me, and this was even added to the jueteng scandal which are baseless," he added.