"We call on the public to remain calm amid these rumors of destabilization," Arroyo said in a speech to members of an elite Army unit at a training camp north of Manila.

Arroyo predecessor and rival Joseph Estrada on Thursday seized on the tense atmosphere to warn the incumbent that she faced a popular revolt because she had illegally snatched the presidency from him.

Estrada insists he was illegally removed from office in a military coup in January 2001, when a bloodless popular revolt ended his 30-month presidency and installed Arroyo, the elected vice president, in his place.

Rumors that a military clique was plotting to overthrow the government sent the peso down to a four-month low against the dollar on Wednesday, when it closed local trading at 54.025 to the greenback.

It lost more ground in early trade Thursday, falling to 54.23 pesos. But after Arroyo and the central bank reassured the market, the unit rallied to close at an intra-day high of 53.95.

Central bank governor Rafael Buenaventura insisted the peso's weakness was due to "seasonal factors" as well as the general movement of Asian currencies against the greenback.

"Our people know the true state of the nation and I am convinced that they will soon rise to expose and repudiate those who have robbed them of their will to elect their leader," said Estrada, who is on trial for corruption.

"The military and police establishments are also restive and suffering from divisiveness and factionalism," he added in a statement from detention.

Estrada, facing the death penalty if convicted, blamed Arroyo for a high crime rate, a weak economy and an inept police force that let loose a convicted Indonesian militant this month, making the Philippines the "laughing stock of the international community."

Arroyo said she had met Wednesday with a group of disaffected junior officers at a dinner at the Malacanang presidential palace and acknowledged "the existence of legitimate grievances among the young officers in the armed forces.

"The expression of their grievances so far as I have seen has been proper and lawful," she noted Thursday.

"They assured me of absolute fealty. We are acting on their grievances and I do not blame the young officers for pushing for internal reforms."

Military officials have passed on complaints from junior officers over low pay, corruption, and inadequate housing facilities for soldiers.

The Philippines suffered seven bloody coup attempts in the late 1980s, setting back economic development for years.

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