Peso up as central banks commit cash to markets

MANILA, Philippines - The peso flirted anew with a 16-month low on Thursday, but news about a global proposal that will provide additional cash in money markets pushed the local currency to a stronger position. The peso appreciated to P46.90 against the dollar, 12 centavos higher than its previous level as the news of a "liquidity swap facility" spread just before the local currency trading came to a close, said Marcelo Ayes, senior vice president for treasury at the Rizal Commercial Banking Corp. “The problem with the credit crisis is really liquidity. With this liquidity swap facility, risk aversion is lessened," Ayes said in a phone interview. The Federal Reserve flushed the United States money market with $70-billion worth of funds to mitigate the ongoing financial crisis. Its announcement was followed by commitments from the likes of the European Central Bank, Bank of England, Swiss National Bank, Bank of Canada, and Bank of Japan to infuse billions of dollars to boost liquidity in the global market. Ayes said this move allowed long-term dollar holders to "unwind" and reduce their position, thus giving the peso space to consolidate. The peso opened at P47.25 to a dollar on Thursday and hit an intraday low of P47.29 and a high of P46.95. The total trading volume for the day stood at P773 million. Ayes said the peso may consolidate towards the P46.70 to P46.80 level "then resume its weakness." "You can't solve what hit the world market 13 months ago overnight," Ayes said. - GMANews.TV