Peso nears 41:$1 territory

The peso climbed near the 41-per-dollar level Thursday on heavy trading volume of $1.5 billion, as the Philippines continued to draw foreign capital flows and remittances despite the renewed volatilities in regional stocks.

“Capital inflows surged again, mostly in the stock market and government securities,” said Bangko Sentral Deputy Governor Diwa Guinigundo.

The peso tracked the upward movement of the euro against the dollar, although other Asian currencies declined, after Greek officials failed to conclude a deal for a bailout package.

The peso closed at 42.18 Thursday, up from 42.21 on the previous trading. It touched a six-month high of 42.08 in early trading.

The stock market, meanwhile, fell Thursday as a snag in talks to prevent Greece going bankrupt weighed on sentiment.

The Philippine Stock Exchange Index dropped 36.18 points, or 0.8 percent, to 4,769.62. Losers swamped gainers, 134 to 42, with 33 issues unchanged.

Metropolitan Bank & Trust Co., the second-largest bank by assets, declined 3 percent to P80.50. The stock was rated “underperform” in initial coverage at DBP-Daiwa SB Capital Markets.

Phoenix Petroleum Philippines Inc. increased 7.5 percent to P13.12, its highest close since May 10. The gasoline retailer said it will pay a P0.10-a-share dividend and a separate 50-percent stock dividend. The shares have jumped 19 percent in the past five days.

Bangko Sentral Governor Amando Tetangco said inflows were boosting the peso and that the monetary authority had scope “for participation” in the foreign-currency market to curb volatility.

The central bank still has monetary “policy space” to cut interest rate as the inflation outlook remains favorable, Tetangco said in an interview. “We don’t want a movement in the exchange rate that could be destabilizing; we don’t want sharp movements.”

Risk appetite was evident in the large amount transacted at the Philippine Dealing System, with volume reaching more than $1.5 billion on Thursday, up from the previous day’s $1.3 billion, and the daily average of just $1 billion.

Analysts attributed the large volume to the intervention of the Bangko Sentral to smoothen the wide swings.

First Metro Investment Bank noted that the peso had been on an appreciation mode since late January, as it received a boost from the roaring stock market and the successful issuance of $1.5 billion national government’s dollar-denominated bonds.

The country’s gross international reserves rose to a record $77 billion as of end-January, as the Bangko Sentral absorbed the excess dollar stocks in the country. –Roderick T. dela Cruz, Manila Standard Today with Bloomberg