THE peso breached the psychological P60:$1 barrier on Thursday and the stock market also fell for most of the day before last-minute climb pared its losses as the war in the Middle East escalated.
The currency weakened by 58 centavos to a new record low of P60.1 against the dollar, its worst close since Monday’s P59.871:$1. It opened at P59.9 and traded as high as P60.4 with volume surging to P2.437 billion from P1.777 billion.
The benchmark Philippine Stock Exchange index (PSEi), meanwhile, fell to as low as 5,934.68 in the afternoon before regaining some ground in the last 15 minutes of trading to end Thursday down 36.83 points, or 0.61 percent, at 6,018.62.
The broader All Shares also fell, by 18.69 points or 0.56 percent, to 3,344.8.
The Bangko Sentral ng Pilipinas (BSP) reiterated its position that intervention would only be done to address currency volatility.
In a statement, the BSP said “it operates in the foreign exchange market to smooth excess volatility and maintain orderly conditions.”
“This is consistent with a flexible exchange rate policy, with intervention limited to tempering large swings that could affect inflation rather than defending any specific level,” the central bank added.
MUFG senior currency analyst Lloyd Chan, meanwhile, said “higher oil prices are going to deliver in terms of trade shock for the Philippines and are going to weigh on the current account.”
“In that regard, we have heard policy signals from the Bangko Sentral ng Pilipinas that they may consider to raise rates [in April], and I think that’s the appropriate response, given the inflation risk.”
A trader said the likelihood that the US Federal Reserve would keep interest rates higher for longer, combined with high oil prices and geopolitical risks, “continues to pressure the peso, with any recovery likely gradual and dependent on a clearer shift in US policy and softer oil.”
Oil prices jumped anew after Iran began targeting energy infrastructure in the Middle East after Israel attacked the South Pars gas field.
Reyes Tacandong & Co. senior adviser Jonathan Ravelas said the market reaction was largely a knee-jerk response, but added that the peso could remain above P60:$1 if the conflict continued to escalate.
Meanwhile, Regina Capital Development Corp. head of sales said the PSEi came under pressure early in the session due to heavy selling after the peso dropped to a record low following the Fed’s decision to keep interest rates unchanged.
The war in the Middle East further weighed on sentiment, he added, and only late-session buying helped trim the day’s losses.
Wendy Estacio-Cruz, head of research at Unicapital Securities Inc., also said the market’s decline reflected concerns over inflation after the Fed maintained rates while raising its inflation outlook amid potential oil price shocks linked to the Iran conflict.
“We think ongoing geopolitical tensions will remain an overhang, with persistent inflation and global uncertainties likely to keep financial conditions tight and cap near-term upside,” she added.
All but one of the six sectoral indices fell, with mining and oil plunging a steep 6.7 percent. Industrial was the only gainer, edging up 0.14 percent.
The broader market saw 133 decliners against 61 gainers while 55 issues were unchanged.
WITH A REPORT FROM REUTERS
