Peso continues rise to P44.355 vs greenback

News of China and the US nearing a deal on boosting the yuan — the first step towards making American goods more competitive than Chinese exports — drove the peso to a fresh 20-month record against the dollar on Thursday. After opening at — and did not go lower than — P44.50 per dollar, climbing to as high as P44.315 before ending the day at P44.355, 17 centavos stronger than Wednesday’s finish. "The prevailing atmosphere is positive [given investor optimism about a possible] revaluation of the yuan," a trader said, noting that the peso’s surge would continue in the medium term, although day-to-day trade might see a correction. The local currency was already strong during the morning trade, sustaining its rally in the afternoon. Turnover was brisk at $1.11 billion, 5 percent higher than in the previous day, with minimal intervention from the central bank, the trader said. "The central bank was there, but whatever intervention they did was insignificant." Another trader noted that if China does decide to revalue its currency, it would do so when least expected. "We know China. It moves when everybody else is not looking. With calls for the revaluation of the yuan all over the news these days, we should not expect it to arrive at a decision anytime soon," the trader said. The trader also traced the local currency’s rally to the rise on Wall Street and other international stock markets. Local share prices, however, slid after investors took profits. The peso has been rising for the past days following news that exports had risen for the fourth consecutive month in February, as well the rescue package from the European Union and International Monetary Fund for debt-saddled Greece. Barclays Capital earlier said the peso could strengthen to P44 per dollar this year as a result of the country’s strong payment position, higher exports and more money sent home by Filipino workers overseas. The investment bank said it was keeping its exchange rate forecast despite uncertainties posed by the May 10 national and local elections. It added that the central bank was likely to intervene in the foreign exchange market to protect the competitiveness of Philippine products in the world market. Exporters alarmed Last week, exporters sounded off their their alarm on the strengthening peso, which they fear would make their prices unattractive to foreign buyers. Exporters in Cebu have also warned that the appreciating peso could put more exporters out of business, saying the central bank should intervene in the foreign exchange market. Sales forecasts for the year, however, will be maintained for now as exporters look to capacity-building programs and other means to improve competitiveness. The sector is generally more comfortable when the dollar costs P46 to P46.50., otherwise their merchandise becomes too pricey for buyers, Philippine Exporters Confederation President Sergio R. Ortiz-Luis Jr. said earlier. The central bank expects the peso to average between P46 and P49 per dollar this year. Barclays has said the central bank would continue to finely balance the need for a stronger currency to keep a lid on imported inflation and the dampening impact of a stronger currency on remittances in local currency terms and by extension, consumption spending. The central bank expects the balance of payments to post a surplus of $3-$4 billion this year from $5.3 billion last year. At the end of February, the payment position — the difference between foreign exchange inflows and outflows — was a surplus of $1.11 billion, or half the $2.2 billion surplus a year earlier. Meanwhile, it expects money sent home by Filipinos abroad to increase by six percent this year from a record $17.35 billion last year. Remittances grew by 8.5 percent to $1.372 billion in January from a year earlier.