Peso hits 4 1/2-yr high on Tuesday

Posted at 11/27/2012 5:05 PM | Updated as of 11/28/2012 8:15 AM

Peso closes at 40.870 vs US dollar

MANILA, Philippines - The Philippine peso hit its strongest level in more than four-and-a-half years on Tuesday with a Greek deal supporting emerging Asian currencies, although intervention was spotted capping the upside. 

The Philippine peso gained on remittance inflows and stop-loss dollar selling. Dealers said they spotted the central banks of Philippines and Taiwan were spotted buying U.S. dollars.  

Regional stocks and the euro also rose after a deal on new debt targets for Greece and a political agreement on disbursing the next installment of aid was announced. 

Still, emerging Asian currencies are seen vulnerable to possible corrections as the agreement has been priced in regional units, some dealers and analysts said. 

In addition to regional authorities' steps to curb currency appreciation, investors are wary of the U.S. "fiscal cliff" of steep tax increases and spending cuts which could push Asia's major export market into recession.

Republicans and Democrats were still at odds as Congress  returned from its Thanksgiving holiday break. 

"There is little momentum to push up Asian currencies more  from here, although it is hard to doubt that there is a long-term bullish trend in the improving U.S. and Chinese economies," said Yuna Park, a currency and bond analyst at Dongbu Securities in Seoul. 

"Some of them are likely to suffer from short-term corrections on potential intervention and fiscal cliff worries," said Park, adding that recent outperformers such as the Philippine peso were likely to fall more. 

The peso was the best-performing emerging Asian currency this year with a 7.2 percent gain against the dollar so far. 

The Philippine peso hit 40.870 per dollar, its strongest since March 2008, as investors dumped greenbacks to stop losses after the 41.000 was broken. 

The central bank was spotted buying dollars to slow down the peso's strength, repeating its recent warnings, dealers said. 

"Peso appreciation is driven more by fundamental flows like exports, tourist receipts, remittances and BPO (business process outsourcing) revenues," Deputy Governor Diwa Guinigundo said in a text message.  

"BSP is of course conscious of the possible fallout in terms of lower external competitiveness... will continue to check the remaining space for FX regulatory liberalization," he added, referring to Bangko Sentral ng Pilipinas. 

Some investors took profits with some short-term peso forwards quoted at a discount. 

"The market seems to be a bit cautious in selling spot dollar lower as onshore points are softer and the euro's upward momentum may have slowed," said a foreign bank dealer in Manila. 

Investors are keeping an eye on the country's third quarter growth data due on Wednesday for clues on the central bank's policy meeting in December. 

Philippine economic growth likely defied the global downdraft and picked up modestly in the third quarter thanks to strong domestic demand and a late spurt in exports, a Reuters poll showed.