Peso closes at new record low of 56.20

The peso plumbed new depths against the dollar yesterday due to rising political concerns and low dollar inflows from both foreign investors and overseas Filipino workers (OFWs).

At the Philippine Dealing System (PDS), the peso lost another 15.50 centavos to close at 56.20 to the dollar, the currency’s weakest closing level ever. The peso closed at 56.045 to $1 on Monday.

Yesterday’s closing rate was also the day’s weakest level – at which currency dealers saw support for the local unit from the Bangko Sentral ng Pilipinas (BSP) – on volume of $131.30 million.

President Arroyo said that too much politics and electioneering remain major drags on the peso.

The President, through deputy spokesman Ricardo Saludo, said the peso remains in an "artificial spiral" and weighed down by "artificial forces."

One trader said the peso made a solo plunge into record lows despite the appreciation of regional currencies, especially the Thai baht and the Japanese yen.

"This is just us," said the trader. "We just don’t have any good news to perk up the peso. There is a lot of reason to be pessimistic and almost no reason to be optimistic."

On the other hand, the Bangko Sentral ng Pilipinas (BSP) said the pressures in the market were aggravated by the seasonally low inflow of dollars from both foreign investors and overseas Filipino workers who usually do not start remitting en masse until close to the opening of the school year.

"There were not enough inflows," said BSP Deputy Governor Amando Tetangco Jr. "Banks were also covering their short positions and there was a demand for dollars from oil companies."

For his part, Deputy Governor Alberto Reyes said the BSP’s monitoring of banks’ foreign exchange transactions will remain "tight" until the May elections.

Earlier, he said the Monetary Board has instructed the BSP to impose fines and administrative sanctions against currency market players found repeatedly violating foreign exchange rules.

He said financial institutions found to be frequently violating the rules will be stripped of their foreign exchange trading licenses and their officers suspended.

Interviewed on the sidelines of an economic briefing that Arroyo’s economic team have yesterday, Reyes said the BSP will double the number of examiners on banks with big forex transactions and will closely review their reporting of trading activities, as well as forex positions.

He said financial institutions that violate forex rules more than three times will have their licenses suspended.

However, he said the BSP, has so far not seen any evidence of violations nor currency speculation, adding that the peso’s fall is purely due to "supply and demand factors."