Peso seen to range between 44-46 to $1 in second half

The peso is expected to hover at the 44 to 46 range against the dollar for the rest of the year due to a rise in US and Philippine interest rates in the second semester, a top executive of a leading foreign bank said.

Jose Arnulfo Veloso, treasurer and head of global markets of HSBC Philippines, said the surprise increase in US Fed funds rate and a possible shortfall in the Philippine government’s revenue collections in 2007 may cause some weakness in the peso.

He said the peso will occasionally test the 42 to 43 levels but will eventually return to the 45 level. “The 45 to the dollar is also called the equilibrium level,” he added.

Likewise, the Bangko Sentral ng Pilipinas (BSP) is expected to continue “to manage the volatility” of the peso “for the sake of Philippine exporters,” he said.

He said a steady 42.50 level can only be achieved through high revenue collection, strong market fundamental, stepped up privatization of government assets, intervention from monetary authorities, and a freeze in US and Philippine interest rates.

The government expects privatization revenues to reach $7.931 billion from the sale of the following: the National Transmission Corp. (TransCo) worth roughly $3 billion; other power generation assets worth $3 billion; RPN Channel 9 worth an estimated $100 million; IBC Channel 13 also worth an estimated $100 million; the 24-percent government share in San Miguel Corp. worth an estimated $1.1 billion; the 29 percent stake in Philippine Long Distance Telephone Corp. worth $463 million, and the 29 percent stake in Manila Electric Corp. worth $168 million.

The HSBC official said he also expects another P26 billion in initial public offerings (IPOs) in the second semester on top of the P32 billion IPO inflows in the first three months of 2007.