Peso rallies on strong OFW remittances

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Peso rallies on strong OFW remittances
Posted: 2:09 AM Apr. 05, 2006
Doris C. Dumlao
Inquirer

THE PESO on Tuesday rallied to within the 50-to-the-dollar level before closing at 51.45 on strong money remittances from overseas Filipino workers (OFWs) ahead of the opening of a new school year in June and on rosier prospects on the government's finances, analysts.

News of the government's plan to buy back Brady bonds -- similar to the strategy adopted by Latin American countries, like Mexico, Brazil and Colombia -- also boosted confidence in the government's financial position, they said.

The peso opened trading Tuesday at 51.03 to the dollar and breached the 51.00 barrier to hit an intra-day high of 50.95 before closing near the intra-day low of 51.05 to the greenback.

The volume of trading amounted to $626.5 million.

"The offshore market is bullish on the Philippines. They're even more bullish than the locals," said Marcelo Ayes, chief foreign exchange dealer at Equitable PCIBank.

Jonathan Ravelas, chief strategist at Banco de Oro Universal Bank, said. "We're looking at 50.50 to the dollar" as the next target rate, given strong OFW remittances ahead of tuition payments starting this month.

OFW remittances are strong in April and May in time for tuition payments for the school year that starts in June.

Ayes said the recent peso upward trend appeared sustainable and the next key barriers would be 50.80 and 50.50 to the dollar.

The peso also benefited Tuesday from a strong regional currency market as the US dollar fell after release of weak US manufacturing data.

The peso broke into the level of 50.00 to the dollar for the first time this year on March 7, on a strong influx of foreign portfolio investments. At that time, the market suspected that the central bank was starting to intervene to stem the peso's sharp rise by buying dollars on the spot market.

Ayes said the market was perked up by expectations that the government's main revenue-collecting agencies -- the Bureau of Internal Revenue and Bureau of Customs -- likely met their collection targets in March.

He added that the proposed Brady bond buyback sent positive signals because it meant that the government was in a stable financial position to afford prepaying the bonds, some of which are to mature in 2018.

"That's why interest rates are likewise going down," he said. With INQ7.net