Analyst: Peso to breach 42:$1 by year-end

ABS-CBN News

Posted at Oct 08 2010 06:19 PM | Updated as of Oct 09 2010 06:34 AM

MANILA, Philippines - The peso will likely breach the 42 to the US dollar level by year-end on strong inflow of remittances from overseas Filipinos during the Christmas holidays, and the inherent weakness of the greenback.

Astro del Castillo, managing head of First Grade Holdings, said the surge in foreign capital, particularly into the stock market, will also continue to benefit the peso.

The Philippine Stock Exchange has been hitting fresh record highs in the last few days, with the key index already above the 4,200-mark.

Del Castillo said a strong peso is a welcome development as it keeps gasoline prices and prices of other basic commodities at current levels.

However, it is bad news for families of overseas Filipino workers and exporters as the value of their dollar income decreases everytime the peso appreciates.

The central bank earlier defended the peso's recent rise to 2-year highs, saying this was not out of line with moves in other Asian currencies.

"It's less the issue of the peso, it's really the dollar's problem," Finance Secretary Cesar Purisima said.

"We believe our relative competitiveness still remains. The policy of the central bank will be to let the market determine the exchange rate," Purisima added.

The peso closed at 43.435 against the dollar on Friday, weaker than Thursday's close of 43.30. - Sheryll Mundo, ABS-CBN News