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Peso strengthens on central bank's threat of rate hike |
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10 February 2004, Tuesday - Philippine Daily Inquirer)
THE PESO regained lost ground against the US dollar Monday, in yet another quiet session after the central bank said it could raise key interest rates or increase the reserve requirements of banks further if the currency's weakness continued, dealers said. |
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The peso also tracked relatively strong regional currencies led by the yen against the dollar, they said.
The peso closed at 55.87 to the dollar, after trading between 55.86 and 55.94 range, on volume of 103.5 million dollars. It had closed trading Friday at 55.960 to the dollar. "The peso was range-bound with the market very cautious following the central bank's comment it may increase interest rates," a commercial bank dealer said. "The regionals were also stronger, including the yen, versus the dollar." The dealer said the peso could extend its gains Tuesday, the start of the official campaign season for the May general elections. "The peso may recover to as high as 55.80 [to the dollar], with support at 56," the dealer said. "The campaign season should not affect the local currency unless something unusual or negative happens," Bangko Sentral ng Pilipinas (BSP) Deputy Governor Amando Tetangco Jr. said. He said the Monetary Board was prepared to take additional policy action "to make sure orderly financial conditions are maintained and price stability is achieved." The BSP, in a surprise move late last week, raised the liquidity reserve requirement of banks to 10 percent from eight percent amid inflationary threats arising from the peso's weakness against the dollar. The increase is expected to siphon off some 30 billion pesos from banks, thus limiting the funds that they can lend to the private sector and invest in dollars. The BSP has also intensified monitoring of dollar transactions by banks and other financial institutions. home | latest news |
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