THE PESO yesterday strengthened against the dollar, bucking the decline on Wall Street, the local bourse and other Asian currencies.

It closed at P42.805, five-and-a-half centavos stronger than Monday’s finish of P42.86. It opened at the day’s low of P43.05 following Wall Street’s dip on Monday night. The dollar also strengthened against the yen, which put pressure on Asian currencies.

But the peso reached an intraday high of P42.76 before it firmed at the day’s close as investors were convinced of the peso’s strength in the medium term, a currency trader said.

The peso was also boosted by government data on imports, which provided a positive lead on exports in the coming months, the trader said.

Another trader said much of the peso’s appreciation yesterday had been brought about by the seasonal surge of dollar remittances from overseas Filipino workers (OFWs), coupled with the broad weakness of the dollar.

"The rally of the dollar is always short-lived. The market is already confident in holding on to their pesos," the trader said.

While risk aversion in overseas markets still cause jitters in the local financial market, the peso’s rise towards a new record is intact, the trader said.

If the market breaks the P42.67 level, the next support level will be at P42.50, the trader said.

While the peso may also consolidate, the local currency will not likely go beyond the $1:P43 level given the stability of US futures, he added.

"We still see flows coming in — that’s why the peso is strengthening," another trader said.

The peso averaged at P42.874, worse than Monday’s P42.848. Total volume rose to $568.5 million from $537.35 million.

Most Asian currencies drifted lower on Tuesday as investors shunned risky assets due to renewed fears about credit markets, but they later cut losses on news that Citigroup would sell a $7.5-billion stake.

The South Korean won, the second worst performer in Asia against the dollar so far this year, steadied near 929 per dollar, virtually flat from late Asian trade on Monday. It fell earlier as far as 934.2.

He said some investors had re-entered carry trades as regional stocks pared losses after Citigroup, Inc said it would sell a stake to the Abu Dhabi Investment Authority, which cheered up the banking sector after its hammering from credit-related losses. MSCI’s measure of Asia Pacific stocks excluding Japan recovered, but was still down by 1%. The dollar pulled away from a two-and-a-half low versus the yen on the Citigroup news.

A continuous rise in Asian currencies against the dollar is not certain after the US currency’s weakness this year. "We are still cautious. We are expecting a modest dollar rebound in early 2008," said David Mann, a currency strategist at Standard Chartered Bank.

[Business World Online]