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By Maricel E. Burgonio, Reporter
THE peso slipped closer to the
47-to-a-dollar level Monday on continued risk aversion as the US
credit crisis hit two European financial giants even as the American
legislature drew closer to a deal aimed at bailing out its banking
system.
At the Philippine Dealing System,
the local currency closed at 46.990 to the greenback, or just a
centavo shy of the 47-to-a-dollar level from Friday’s 46.745
finish.
Trading volume climbed to
$664.600 million from the weekend’s $559.500 million.
“The risk aversion continues
not only because of Lehman Brothers but also with the news on the
insolvency of Fortis NV that strengthens the US dollar and weakens
the local currency,” Marcelo Ayes, RCBC senior vice president,
said, referring to the bailout of the northern European financial
conglomerate orchestrated by the Benelux countries.
Ayes said the peso is likely to
range between 46.78 and 47.30 due to risk aversion and the import
season, which will last until mid-October.
The start of the remittance
season later next month, however, would speed up the recovery of the
peso, he said.
The Bangko Sentral ng Pilipinas (BSP)
said local lenders are reevaluating their credit standards, citing
the tightness in foreign exchange swap trading facilities despite
ample dollars in the domestic financial system.
The forex swap is an over the
counter short-term interest rate derivative instrument. It is used
for hedging currency positions and for speculation. Financial
institutions use it to fund their foreign exchange balances.
“The forex swap market has been
under some pressure the past two weeks. This is, however,
understandable, as both domestic banks and branches of foreign
banks—likely under instruction from their head
offices—reevaluate their credit standards and watch their dollar
positions, given that the root of the financial market turmoil is
the United States,” BSP Governor Amando Tetangco Jr. told
reporters on the sidelines of a Senate hearing on the US financial
turmoil.
“There is ample US dollar
liquidity in our system. The market may be experiencing some
friction lately in terms of distribution, but I believe the market
would be able to sort this out. Nonetheless, the BSP continues to be
in both the spot and swap forex markets, as part of our normal
operations to help smoothen volatilities in the exchange rate,” he
added.
He assured that the external
liquidity position of the country remains comfortable and sufficient
liquidity coming from other sources.
“Just reaching an agreement [on
the US bailout plan] will likely soothe markets and tend to reduce
risk aversion. This is expected to be positive for domestic markets.
The contents of the agreement will be watched over the coming days.
As funds flows improve, we may see an easing in dollar liquidity in
the local market,” the BSP chief said.
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