PHILIPPINE NEWS SERVICE — THE peso continued to climb to fresh seven-year highs, breaking through 45 against the dollar and completing its best weekly performance in years after the government said it would not impose capital controls to curb the currency’s rise.
The unit opened at 44.99 and closed at 44.80, averaging at 44.86 on a volume turnover of $517 million, lower than Thursday’s $637.5 million.
The peso gained further even as the Philippines’ third-largest bank forecast that the gross domestic product would grow by 6.4 percent this year, well within the government’s forecast range.
Finance Secretary Gary Teves said “non-market forces, like restrictions on capital,” would not be used to cap the peso’s advance to its highest level in almost seven years.
“Investors are confident the government will allow market forces to determine the exchange rate, encouraging more funds into stocks,” said Roland Avante, treasurer of Chinatrust (Philippines) Commercial Bank.
Traders said the peso’s momentum pointed to a further appreciation, adding markets were awaiting President Gloria Macapagal Arroyo’s State-of-the- Nation Address on Monday, from which many investors would take their cue.
But others were on guard for a correction, saying the peso’s strengthening might now be overdone.
Central bank Gov. Amando Tetangco Jr. said “the peso is buoyed by equity-related inflows and is moving up against the US dollar like the other regional currencies. Still, the rapid pace of appreciation is of some concern, since this tends to increase volatility,” he said.
Rizal Commercial Banking Corp. warned of a correction soon. “[The peso] could go to 44.75 and even 44.50, but that would be the peak,” said bank vice president Marcelo Ayes.
“It’s bound for a consolidation. The import season is upon us, and it’s now the tail end of the remittance season. A healthy correction is necessary,” he said.
The Metropolitan Bank and Trust Co. saw the peso’s support level at 44.80, but said the currency still had room to appreciate to 44.60.
Another banker said the peso would continue to be strong because of the continuing flow of portfolio and foreign direct investment.
“Not only do we see an increase in remittances, but there’s also a huge amount of dollars coming in for the [initial public offerings], and exports continue to expand despite the peso’s appreciation,” said Adelbert Legasto, executive vice president of Bank of the Philippine Islands, the Philippines’ third-largest bank.
The bank sees the peso ending at 45 to the dollar by the end of the year.
The bank said the 6.4-percent GDP growth for this year would be driven largely by the services sector, which it expects to expand by 9 percent.
Legasto said agriculture was expected to grow by 4.2 percent, industry by 5.3 percent, and the gross national product—GDP plus income from overseas—by 6.6 percent.
“We are more or less in agreement with government forecasts,” BPI vice president Theresa Javier said.