However, they said the decline was relatively orderly with no evidence the currency was heading for a meltdown of Asian Financial crisis proportions.

The central bank has frequently supplied dollar liquidity to the market over the past few weeks, and confirmed it intervened again on Wednesday in order to ensure orderly movement in the exchange rate.

Deputy-governor Amando Tetangco said the bank's policy-making Monetary Board will discuss at its regular meeting on Friday whether a hike in overnight rates is necessary to keep the peso stable.

The peso was quoted at 46.590/610after earlier sinking to an all-time low of 46.610. The peso's previous record low was 46.50, reached in January 1998 during the Asian crisis.

The peso's plunge cast a pall of gloom over the stock market. The composite index slipped to its lowest closing level in nearly two years at 1,372.70 points, a decline of 1.64 percent.

The president of the Economist Intelligence Unit in the Philippines, Peter Wallace, said the central bank faces a dilemma on overnight rates, which largely determine banks' lending rates.

"Put interest rates up, yes, that sort of offsets the risk factor (from a weaker peso) to some degree...but then that's going to impact on domestic business, which is already struggling," he said.

He added that the benefits to exports from a weaker currency are limited, given the heavy Reliance on capital goods imports. "You have to keep in mind that the bulk of exports today,over 60 percent, is electronics. And some 70 percent of that uses imported components. So the actual benefit from a depreciation of the peso is relatively small."

(Reuters)