MANILA, Philippines - Financial markets ended the week on a losing streak with the peso closing at 50 to $1 due to uncertainties brought about by the possibility of another increase in US interest rates as well as strong demand from importers.
At the Philippine Stock Exchange (PSE), the main composite index fell 0.52 percent, or 38.46 points, to close at 7,244.79, while the broader All Shares index declined 0.31 percent or 13.78 points to settle at 4,388.01.
“Markets resorted to profit taking after Thursday’s bargain hunting as US stocks managed to eke out small gains as the major stock averages overcame a sense of rally fatigue to consolidate their run to all-time record highs,” Regina Capital Development Corp.’s Luis Limlingan said.
The local currency shed three centavos after opening stronger at 49.94 to $1 from Thursday’s 49.97 to $1. This was the currency’s weakest level since the peso closed at 50.09 to $1 on Nov. 15, 2006.
Aside from uncertainty of another rate increase by the US Federal Reserve next month, BSP Deputy Governor and officer in charge Diwa Guinigundo also attributed the weakening of the peso against the dollar to the strong demand for dollars from corporations .
“Still the same story of external market uncertainty. And despite market uncertainty about a March US fed interest rate hike, there was higher demand from corporates today. This drove the peso to touch the 50 to a dollar level,” Guinigundo said.
“We continue to see negative market sentiment dominating the strong Phil market fundamentals. We should see market reacting to news that overseas Filipino remittances remain resilient and growth prospects remain very positive at the back of strong consumption, investment and public expenditures,” he added.
The peso shed 5.2 percent, making it the worst performing currency in Southeast Asia last year.
However, Guinigundo explained the local currency remains competitive in the region.
“In real terms, peso remains competitive and we continue to monitor pressure from weak exchange rate even as the exchange rate pass through to domestic inflation has gone down in recent years. There is no substitute to constant monitoring and surveillance for any possible risks in the horizon,” he said.
Emilio Neri Jr., chief economist of the Bank of the Philippine Islands, said importers have had a more significant than usual demand while regular sellers were not as active during the trading session.
For his part, ING Bank chief economist Joey Cuyegkeng said this was the first time in a little more than 10 years the peso closed at 50 to $1 as demand for the greenback throughout the week pressured the local currency.
He added some degree of risk off sentiment among currencies in Southeast Asia could also have affected the peso,
“The peso could remain under pressure although seasonal inflows in March could provide some strength. Retaining the P50 resistance early next week would be important. A convincing break above this may push peso to the next target of 50.60,” he said.
He warned a faster pace of tightening by the US Fed and economic policies of the Trump administration which are expected to be announced in next 10 days or so would likely affect forecasts.
ING sees a weaker peso of between 51.50 and 51.80 per $1 by the end of the year.
Meanwhile, local counters were covered in red, except for financials which posted a slight 0.02 percent increase.
The rest finished at a loss, with services recording the biggest drop of 1.32 percent.
Market breadth was negative with decliners edging out advancers, 99 to 93, while 48 stocks did not change. Value turnover stood at P6.99 billion.
Traders said investors continued to await more pronouncements from the US Federal Reserve after hinting three possible rate hikes this year. – With Richmond Mercurio