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Wednesday, September 10, 2003
Peso sure to recover after slide: officials (3:15 pm)
By Mynardo Macaraig
MANILA -- The Philippine peso is expected to recover to 54 to the dollar by the end of the year as political concerns ebb and monetary authorities move to tackle speculators, Central Bank Gov. Rafael Buenaventura said Wednesday.
The peso has been hovering near its historic low of 55.75 to the dollar, the level seen two and a half years ago when a popular revolt toppled then president Joseph Estrada.
The currency was at 55.078 to the dollar in mid-afternoon trade Wednesday, up from 55.195 late Tuesday.
In a forum with the Foreign Correspondents Association of the Philippines (Focap), Buenaventura said he expected the peso to recover later in the year with the 54 level "a good number to look at."
Buenaventura remarked that the peso should really be at 52 to 54 to the dollar and would be except largely for "non-economic events" such as the July 27 failed mutiny and continued fears of further destabilization attempts being mounted against the government.
He also cited a court ruling suspending him and other Central Bank officials last month, which had rattled investor confidence even though he and the other officials still remain at their posts.
The ruling is being appealed and Buenaventura said he is confident that he would complete his term as central bank chief in the 22 months.
He reiterated that the country still enjoyed good macro-economic fundamentals despite the political issues it faces.
Buenaventura also cited seasonal factors such as an upturn in imports and a traditional drop in remittances from the millions of Filipinos working overseas as further pulling down the peso in August and September.
However, these factors will pass as imports traditionally slow down and remittances increase in the last months of the year.
"Clearly, there is no panic in the market," Buenaventura said, adding that the Central Bank was ready to intervene to stabilize the exchange rate in case of sharp swings caused by non-economic concerns.
President Arroyo, in a statement Wednesday, said she was also confident that monetary authorities had enough powers to arrest the peso's slide.
Arroyo blamed the peso's weakness on "mild transient shocks occasioned by politicking and destabilization attempts," referring to corruption allegations against her family the failed coup.
Buenaventura said the Central Bank would not use its foreign reserves to prop up the local currency.
The Central Bank, which borrowed US$500 million earlier this year, was scheduled to borrow another US$500 million before the end of 2003 to further bolster its foreign exchange reserves and boost confidence.
Buenaventura expressed optimism that the political worries which have weighed down the currency will eventually pass but conceded that this will be a gradual process.
"Only time will cure that," he remarked.
He also cited a decision last month to remove a three-tiered system for banks' placements with the central bank, a move which was intended to "siphon off excess liquidity in the system," so cutting back on funds available for speculation against the currency.
To further bolster the peso, Buenaventura called on the Congress to strengthen laws against dollar speculation. Existing laws only impose small fines on offending institutions.
Arroyo expressed confidence the country is recovering from its political shocks.
"We have gradually pulled the nation back on track and there is no cause for undue concern," she said, adding "our people are undeterred in their will to resist destabilization and sustain enterprise and constructive activities." AFP
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