BSP intervenes to Limit Peso's rise.

Excerpts from today’s Philippine Daily Inquirer on the Peso’s milestone 7 year high (highlight mine)…

``Upbeat foreign investor sentiment perked up the peso Tuesday to a new seven-year high of 44.23 to the dollar before profit-taking and central bank intervention pulled the rate to a weaker finish of 44.31, currency traders said…

``Traders said offshore investors were more bullish than local traders and were quoting the peso at 44.15-44.20 to the greenback in over-the-counter deals, outside the currency exchange Philippine Dealing System.

``The peso would have strengthened further if not for continued dollar-buying by the central bank, Bangko Sentral ng Pilipinas (BSP), on the spot market. However, dealers said the BSP purchases were not as heavy as in previous days as its dealers saw that the market was nearing a correction.

``The BSP purchases were estimated at $100-$200 million. Tuesday’s total volume was $640 million.

``The peso’s extended rally was also supported by a strong regional currency market, which in turn was caused by weak sentiment on the US dollar and by the region’s much-improved economic fundamentals.

***

AS we previously noted, either the BSP tolerates the increase of the Peso or limit or control the Peso’s price movement by means of market operations; by printing pesos to buy the US dollar, where both actions are inflationary, added liquidity into the financial system should further prop the activities in the PSE.

Another notable: in contrast to the suggestion of some experts that the Peso’s rise has been a local phenomenon, instead, as pointed out in the article, the Peso’s rise has been impelled by REGIONAL MOVEMENTS, aside from the plight of the US dollar which means this has been a global financial markets driven phenomenon rather than just plain vanilla economics.

We have earlier seen locals support the Phisix during the latest credit crunch shakeout. Since the breakdown of the US dollar Index to an uncharted low, foreign money has now turned aggressively bullish on the Philippine assets. This turn of events could fire up an accelerated ascent in the Phisix barring any shocks.