Philippines peso weakens even more

MANILA, Philippines - The peso on Tuesday extended its losing streak against the dollar, as foreign banks bought back the greenback on expectations it will continue its recovery push after the Christmas holidays. The local currency shed 10 centavos more from Monday’s finish to close at P47.41 per dollar, marking its third straight day of losses. Foreign banks were spotted beefing up their dollar holdings ahead of a week-long Christmas break that begins on Dec. 25. The US currency, which has been enjoying gains since late last week, is widely expected to reassert its strength early next year as risk aversion worsens. "It was evident that there was some closing of position by foreign investors. Clearly, it’s the foreign banks leading the buying today, partly to fund the repatriation ahead of the yearend," a trader said. "There was some short covering and a little positioning because of the dollar’s strength overnight. Most of the offshore players are going long dollar or covering short position," said Rafael S. Algarra, Jr., treasurer of the Security Bank Corp. The peso’s fall was cushioned by belief that local-denominated assets remained more attractive than those denominated in the US currency, given the still wide interest differential between Philippine and US key policy rates. The US Federal Reserve’s federal funds rate is now at the zero to 0.25% range, while the Bangko Sentral ng Pilipinas’ overnight borrowing rate is at 5.5%. "Banks were trying to sell dollars for value tomorrow. In terms of rate differential, it’s still advantageous to hold on to peso over the long holidays," a trader from a local bank said. The peso closed near its intraday high of P47.33 per dollar, recovering from an intraday trough of P47.64 after a weak start at P47.40. Trading volume remained thin at $222.23 million, as most of the traders have gone off for the holidays. — Maria Eloisa I. Calderon, BusinessWorld