MANILA, Philippines - The peso climbed yesterday to its strongest level in 39 months, breaching the P41 to $1 level, as investors cheered the announcement by US President Barack Obama about the end of the debt deadlock that could have triggered a default and a downgrade of the triple A credit rating of the US.
The peso gained 21.5 centavos to P41.925 yesterday from Friday's closing of P42.140.
The local currency hit an intra-day high of P41.90 as volume was heavy at $899.3 million from $844.87 million last Friday.
This was the highest level for the peso since closing at P41.87 on April 21, 2008.
Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said in an interview that the foreign exchange market would remain volatile not only because of developments in the US but in Europe as well.
"The peso has breached the 42-to-the-dollar level. It's trading at P41.925 so it has even appreciated given the problems not only in the US but also in Europe," Tetangco stressed.
He pointed out that the exchange rate is being affected by positive sentiments with respect to the Philippines, together with the other emerging markets, of continued economic growth that is faster than the advanced economies.
"In terms of the foreign exchange market, I think that what's going to happen is there could be some volatility in the exchange rate. No one really knows how this problem is going to affect financial markets around the world," he added.
The BSP chief also cited the general weakness of the US dollar leading to strong foreign capital inflows into emerging markets including the Philippines.
"Our interest rate is still higher than interest rate in advanced economies and general dollar weakness. So I think if one looks at the data we'll see that foreign inflows, capital inflows, have continued even with this problem in the US and in Europe," Tetangco said.
Leaders of the clashing Democrats and Republicans in the US chose to end debates that could have pushed the US Congress to a debt default. The agreement that would cut about $1 trillion in spending over the next 10 years must be ratified by both the Senate and the House of Representatives.
Tetangco added that the performance of the equities market would depend on what's happening in the real sector profits.
"Again there may be some volatility but we don't foresee a collapse or significant drop in either the equities or the foreign exchange market." he said.
The Philippine Stock Exchange index (PSEi) closed at a new record level of 4,550.53 yesterday, up 46.90 points or 1.04 percent.
Year-to-date, the PSEi has gained 8.32 percent or 349.39 points.
Source: Philstar
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