Peso weakens anew vs dollar

The peso weakened anew against the dollar, losing 19 centavos to settle at 55.120 yesterday from Tuesday’s close of 54.930 to the dollar as banks and companies took advantage of the dollar’s cheaper rates to build their dollar reserves.

At the Philippine Dealing System (PDS), the peso opened at 55 before hitting a high of 55.120 and a low of 54.950 against the greenback.

Total volume traded amounted to $145.50 million on an average rate of 55.044 to the dollar.

Traders said there was a strong demand for the greenback due to the continued weakening of the dollar against major currencies.

Meanwhile from Dubai, Bangko Sentral ng Pilipinas Rafael B. Buenaventura said yesterday he was reasonably confident the government would "stay the course" and resist the temptation to ramp up spending in the run up to the May 2004 elections.

Buenaventura said ministers knew the BSP would respond with a tighter monetary policy if the government relaxed the improved fiscal discipline it had shown this year.

"The last thing the government needs going into an election is inflationary pressure leading to higher interest rates and leading to pressures on exchange rate," he said.

"So I don’t think they will be foolish enough to do that. That’s why I feel relatively confident that they won’t do it."

Pre-election political maneuvering and a recent failed military mutiny had created "political noise" that had prevented the peso from sharing in a recent rally by Asian currencies, the BSP chief said.

He said he expected the currency to end the year around 54 per dollar, compared with current levels around 55.10.

But without political distractions, the currency would end 2004 around 52 per dollar, he added.

In a separate interview, Finance Secretary Jose Isidro Camacho said he was concerned that the peso did not reelect the country’s economic fundamentals.

"I personally believe the present level undervalues the peso," he said.