MANILA, Philippines - The peso broke into the 44-to-$1-level yesterday, raising 25 centavos to close at 44.805 to a dollar from Wednesday’s 45.098 to $1 as the country’ first automated national and local elections last Monday was generally peaceful and successful.
The currency opened stronger at 44.960 to $1 before strengthening to an intra-day high of 44.80 to $1.
A total of $1.661 billion changed hands yesterday at the Philippine Dealing and Exchange Corp. or almost double Wednesday’s volume of $855.65 million.
Currency traders said the peso has recovered strongly over the past few days after retracing back to the 45 to $1 level due to pre-election jitters as investors were spooked by the malfunctioning of the precint count optical scan (PCOS) machines tested a few days before the May 10 elections.
London-based think tank Capital Economics Ltd sees the peso appreciating further to 43 to $1 on the back of higher policy rates and rising international reserves.
“Higher policy rates, combined with sustained recovery and a likely move up in foreign reserves, should bring more peso appreciation. Our long-held forecast is that the peso will rise to P43 against the US dollar by end-2010 and to P41 by mid-2011,” the think-tank said in a study entitled “Philippine elections to bring long run market gains.”
Traders said the continued strengthening of oversees Filipino workers’ remittances, recovering export sector as well as strong international reserves would continue to fuel the appreciation of the peso against the dollar.
The National Statistics Office (NSO) reported earlier that the country’s merchandise exports surged by 42.9 percent to $4.176 billion in the first quarter of the year from $2.907 billion in the same quarter last year.
Investment bank Barclays Capital economist Prakriti Sofat said the peso would likely average 44 to $1 because of robust OFW remittances and recovering exports.
Sofat also cited the smooth turnout of the recently concluded elections indicating a clear victory for Liberal Party standard bearer Benigno “Nonoy” Aquino III.