Foreign banks optimistic on peso recovery after May polls

Foreign banks were even more optimistic in declaring a more dramatic recovery of the peso after the May polls, saying it could bounce back to its early 2003 level of 52 to the dollar.

This was after the Bangko Sentral ng Pilipinas had earlier predicted a recovery of P54 to the dollar level in the aftermath of the election which is expected to be tightly-fought between incumbent President Arroyo and opposition standard bearer Fernando Poe Jr.

"It’s not far-fetched we see that as a possibility," said John McGowan, treasury chief of the Hong Kong and Shanghai Banking Corp. (HSBC) Philippines.

According to McGowan, the market, however, would be watching the appointment of new officials to key positions on the fiscal and monetary departments.

"A hundred day honeymoon is usual while everyone is watching out who will be appointed into the economic team," McGowan said. It doesn’t really matter who will win, the important factor is the removal of the uncertainty.

He said foreign banks have no expectations of who will win the presidency, but he admitted that in a close fight, the incumbent with political machinery would win.

The peso began recovering this week, appreciating to as high as 55.66 to the dollar for the first time since January after results of opinion polls showing President Arroyo surging to a significant three-percentage lead over Poe were released.

"Exactly how far this recovery will go and for how long, we don’t know," McGowan said, adding that the first decisions of the new administration would be critical in sustaining the market.