Terror jitters send peso reeling beyond 53-to-$1

Fresh terror attacks sent regional financial markets reeling yesterday causing the peso, along with most currencies in the region, to plunge to its lowest level in 14 months.

At the Philippine Dealing System (PDS), the peso closed at 53.030 to the greenback, its lowest level since Aug. 9 last year when it closed at 53 to $1.

"The peso traded weaker as expected because of jitters in the aftermath of the Bali bombing," a dealer with a local commercial bank said.

"Fears that local groups with Al-Qaeda links would launch the same attacks are a big dampener for the peso," the dealer said.

The peso traded within a range of 52.90 to 53.05 to $1 on a volume of $109.4 million.

Industry sources disclosed that the Bangko Sentral ng Pilipinas (BSP) was in the market for $20 to $25 million. "But when they realized that it was hard to stop (the peso’s fall), they decided to let go," the source said.

Fortunately, the source said, corporate buyers refused to buy at these levels. "But the situation is still touch and go. The movement of the peso would depend heavily on how today’s trading would go," the source said.

BSP Deputy Governor Amando Tetangco Jr. told reporters that the peso tracked the general weakness of regional currencies, led by the Indonesian rupiah which plummeted to a five-month low in reaction to the Bali incident.

The Singapore dollar also closed at $1.7 while the Thai Baht closed at 44 to $1, down from around 43.12 to the dollar last week.

"What happened there was that there was regional weakness and there was also some dollar demand locally, coming mainly from the energy sector," Tetangco said.

Oil companies have been stockpiling supply for the last few weeks, creating a demand for foreign currency that they require in order to make their oil importations.

Ordinarily, the volume of dollar inflows from overseas Filipino workers (OFWs) would easily dampen the effect of this demand but external factors complicated the market forces pressing against the peso.

Tetangco, however, would not comment on whether reports were accurate that the BSP attempted to prop up the peso. "I will not comment on that," he said.

Tetangco said what he is willing to admit only is that the BSP’s policy is to allow market forces to determine the exchange rate although it had provisions in case the exchange rate moves "too sharply." He also declined to define what the BSP considered a sharp movement.

Nonetheless, Tetangco said that after the depreciation early in the trading day, the peso corrected somewhat as a result of dollar inflows from OFWs.

"Some supply came out, some banks even started to shortsell," he said. "That’s why it corrected towards the end of the morning session."

Tetangco said the volatility is likely to be temporary but he admitted it will be difficult to predict considering the external factors that could complicate the situation further.

"The good thing is that we are expecting bigger dollar inflows from OFWs in the coming months," he said. "We’ll see how it goes today."