Peso weakens to P49.37

MANILA, Philippines - The peso on Thursday weakened against the dollar as the greenback strengthened in overseas markets while banks covered for short dollar positions. The peso capped the day at P49.37 to a dollar, nineteen centavos weaker than the P49.18 close on Wednesday. It opened strong at P49.10 and reached an intraday high of P49.06 during morning trade as it tracked the rally in Wall Street. The Dow Jones industrial average gained 172.60 points to 8,591.69 points on Wednesday night as reports of a resurgence in mortgage applications overshadowed disappointing economic data. But the peso declined to a low of P49.39 before firming up to the day’s close after banks found buying opportunities on the back of the peso’s rally during morning trade. "The market took the opportunity to cover their shorts," a currency trader said. The trader added that remittances from Filipinos living and working abroad were already coming in ahead of the Christmas holidays, but the strong dollar inflows were offset by the negative sentiment abroad. "Banks were playing safe. There were concerns on the bankruptcy of companies such as Chrysler and General Motors," the trader said, adding that demand for dollars poured at P49.10-per-dollar levels. A bank treasury official said the dollar strengthened overseas following expectations the European Central Bank (ECB) and the Bank of England would cut interest rates to avert a sharp economic downturn. "News saying that the Bank of England and the ECB would probably cut their rates pushed up the dollar," he said. The official also said Asian stock markets were on the soft side due to weak sentiments in Western markets, and this "put some buying interest in the dollar." The volume of transacted dollars reached $535.8 million, better than Wednesday’s $469 million. The peso was expected to trade between P49.10 and P49.50 today, the trader said. — Gerard S. dela Peña, BusinessWorld