The Philippine peso climbed to a fresh 2-1/2 year high on Monday, breaking a key technical level, on optimism about the government's fiscal reform programme and lower yields at a regular auction of government debt.
The peso hit 52.80 per dollar, more than half a percent from Thursday - the last trading day of 2005 - and at its highest level since May 2003.
It closed local spot market trades at 52.835 from 53.09 on Thursday. Philippine markets were closed on Friday for a public holiday. Total volume of trades reached $382.52 million, more than double Thursday's volume of $138.63 million.
The currency ended 2005 as the best performer in Asia, with a 6.01 percent gain for the year, boosted by hefty inflows of remittances from Filipinos working overseas.
"Lower yields at the T-bill auction means there's good demand for the currency," said a currency trader at a big local bank, adding the breach of the 53 per dollar technical level gave a strong signal to the market.
The benchmark 91-day Treasury bill, used by banks as basis for pricing their loans, fetched an average rate of 4.961 percent at Monday's auction, down 185 basis points from 5.146 percent at the government's last auction on November 29.
The Philippines borrows heavily from local and foreign debt markets to fund its budget deficit, which the government expects to come in between 160 and 165 billion pesos in 2005 against the goal of 180 billion pesos, or 3.4 percent of gross domestic product.
The budget deficit is expected to narrow to 125 billion pesos, or 2.1 percent of GDP, in 2006, helped by additional revenues of about 80 billion pesos from an increase in the expanded value-added tax rate to 12 percent from 10 percent now.
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