Peso nears 55-to-a-dollar

The peso lost another five centavos against the dollar yesterday, pulled down by the weakness of the Japanese yen and the Thai baht as regional markets traded under the shadow of a looming war in the Middle East.

The peso closed at 54.90 to $1, inching ever closer to the 55-to-the-dollar mark .

The peso has been trying to hold out on its own but yesterday’s session at the Philippine Dealing System (PDS) reflected pent-up nervousness as the market braced itself against the worsening US-Iraq standoff.

The peso opened weak at 54.90 to the dollar and tried to recover some ground but eventually yielded to pressure and closed at the same level.

The Bangko Sentral ng Pilipinas (BSP) said it did not intervene in the market but officials said it had the option to "provide liquidity" to the market should the pressure build up further.

BSP Acting Governor Amando Tetangco said the central bank was sticking to its official policy of ensuring that there was liquidity in the market.

Despite the persistent weakness of the peso, however, central bank officials insisted that the depreciation was only temporary and the currency would eventually bounce back during the second half of the year, if not earlier.

The BSP, however, admitted that the prolonged weakness in the peso would have an impact on the economy, but the immediate effect would be in the national inflation rate.

Before the weak peso causes damage to the rest of the economy, the BSP expressed optimism that it would have recovered to levels that reflect fundamentals.

Tetangco said the market was currently being driven by uncertainties in the geopolitical situation and these were factors that could neither be predicted nor mitigated.

The BSP earlier said that by the second half of the year, the peso would recover and the average exchange rate would be around 52 to the dollar as projected by the BSP.