Peso closes at 2-year high of 43.88:$1

MANILA, Philippines – The peso broke into the 43 to $1 territory yesterday, closing at a more than two-year high of 43.880 to $1 as the greenback remained under pressure after the US Federal Reserve decided to keep its benchmark interest rates at record lows but vowed to continue to supporting its fragile US economy.

The peso gained 12.50 centavos to close at 43.880 to $1 from Tuesday’s close of 44.005 to $1. The local currency opened stronger at 43.95 to $1 before closing at the day’s intraday high of 43.88 to the dollar.

This was its strongest level in 25 months or since it closed at 43.820 to $1 last Aug. 6, 2008.

Trade at the Philipping Dealing and Exchange Corp. remained brisk as $1.267 billion changed hands compared to $987.93 million last Tuesday.

Currency traders said in an interview that the US dollar fell sharply lower versus other currencies including the peso after the Federal Open Market Committee stated it was ready to provide stimuli for the US economy.

Traders said the US government printed more greenback in preparation for additional quantitative easing to address rising unemployment as well as falling prices.

The US Fed kept funds rate in the target range of zero to 0.25 percent “for an extended period” and maintained its policy of reinvesting principal payments from its securities holdings that it established in August.

The body said it would continue to ‘monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate’.

Another trader said the Bangko Sentral ng Pilipinas (BSP) intervened in the foreign exchange market to smoothen the movement of the peso against the US dollar.

The trader pointed out that the central bank shelled out as much as $400 million to intervene in the forex market yesterday.

Had the BSP not intervened, the trader said the peso could have strengthened further to 43.75 to $1. –Lawrence Agcaoili (The Philippine Star)