THE peso sank to a new all-time low of P62.40:$1 on Tuesday as the dollar continued to strengthen amid expectations of a Federal Reserve rate hike later this month and an escalation of hostilities in the Middle East.
The currency weakened by 13 and a half centavos from the previous record low of P62.265 hit last Friday. It opened the week — Philippine financial markets were closed Monday for a holiday — at P62.25 to the greenback and ended at the day’s trading high.
Union Bank of the Philippines chief economist Ruben Carlo Asuncion said the peso’s fall was driven by “rising US Treasury yields, growing expectations of a Federal Reserve rate hike, and higher oil prices amid escalating geopolitical tensions in the Middle East.”
“These developments have encouraged investors to shift toward dollar assets while increasing inflation and import cost concerns for oil-importing economies such as the Philippines,” he said.
The peso could remain under pressure in the near term “as markets focus on upcoming US economic data and the Fed’s policy decision [during its Sept. 15-16 meeting],” Asuncion said, adding that “sustained strength in the dollar, elevated global yields, and higher energy prices could keep the currency on the defensive.
“However, continued support from remittances, BPO (business process outsourcing) revenues, tourism receipts, and foreign investment inflows should help temper excessive volatility,” he continued.
“Overall, global factors are likely to remain the primary drivers of the peso’s movement in the coming months.”
The currency’s drop was ignored by the stock market, with the benchmark Philippine Stock Exchange index (PSEi) climbing back above the 6,000 level as investors hunted for bargains following four straight sessions of losses.
The PSEi added 137.56 points, or 2.31 percent, to 6,093.89, while the broader All Shares gained 44.20 points, or 1.33 percent, and ended the day at 3,363.19.
“The local market bounced back as investors hunted for bargains after a four-day decline,” Philstocks Financial Inc. research manager Japhet Tantiangco said.
Market sentiment was also supported by the latest manufacturing data, with the S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rising to 54.9 in August from 51.8 in July.
The reading pointed to a stronger expansion in the manufacturing sector, helping ease concerns over the local economy, Tantiangco said.
Luis Limlingan, head of sales at Regina Capital Development Corp., said strong buying pressure pushed the market higher as investors took advantage of attractive valuations, particularly among blue-chip stocks.
Sentiment was further lifted by the manufacturing PMI, which marked the fourth consecutive month of expansion, Limlingan also said.
Trading remained active with net value turnover reaching P8.24 billion, but foreign investors remained net sellers, posting net outflows of P92.52 million.
Market breadth turned positive, with 106 gainers against 88 decliners, while 64 stocks were unchanged.
The services index led sectoral gains, rising 5.45 percent, while mining and oil was the biggest decliner, falling 1.20 percent.
