THE peso came close to hitting P62 to the dollar on Wednesday, posting a new intraday record low of P61.995 to the greenback before ending the day 3 centavos weaker at P61.815:$1.
The drop led to a steep plunge for the benchmark Philippine Stock Market index (PSEi), which shed 106.36 points, or 1.70 percent, to a 6,158.34 close.
Union Bank of the Philippines chief economist Ruben Carlo Asuncion said the peso’s weakness was mainly due to external factors, particularly rising oil prices, heightened geopolitical tensions and continued dollar strength.
“As a major oil importer, the Philippines is vulnerable to higher energy costs, which increase demand for dollars and weigh on the currency,” Asuncion said.
Reyes Tacandong & Co. senior adviser Jonathan Ravelas warned that the peso could hit P62:$1 in the coming days.
The dollar, he said, gained as investors positioned ahead of the Aug. 19 release of the Federal Reserve’s July FOMC meeting minutes, “hoping for guidance on the interest rate outlook.”
Uncertainty in the Middle East is encouraging a flight to the safe-haven dollar, Ravelas added.
Regina Capital Development Corp. head of sales Luis Limlingan, meanwhile, said pressure on equities rose as the peso’s drop had heightened concerns over inflation and borrowing costs.
Philstocks Financial Inc. research manager Japhet Tantiangco said the rise in oil prices and the peso’s record intraday drop was caused by fears of a further escalation of the US-Iran war.
Heightened geopolitical risks prompted broad-based selling, with all sectoral indices ending lower. Services suffered the steepest decline at 2.68 percent.
Foreign investors were also net sellers with P865.09 million in outflows. Trading remained subdued, with net value turnover at P5.68 billion.
Decliners outnumbered gainers on a company basis, 119 to 74, while 54 closed unchanged.
Elsewhere in the region, most emerging Asian stocks fell as rising oil prices and elevated global bond yields weighed on risk appetite, with South Korean shares leading regional declines.
The MSCI Emerging Asia equities index fell 2.1 percent, tracking Wall Street losses overnight, while investors remained wary after the yield on the US 30-year Treasury touched its highest level in nearly two decades this week.
Higher global yields typically weigh on emerging market assets by making developed-market debt more attractive, while rising crude prices threaten to worsen inflation and increase import costs for many of Asia’s energy-dependent economies.
“Oil above $90 and rising developed-market yields create a double squeeze for oil-importing emerging markets: higher import bills weaken currencies and lift inflation, while higher global yields raise funding costs and pull capital toward developed markets,” said Glenn Yin, director of research at ACCM.
It pressures valuations and margins, hitting energy importers hardest unless growth and earnings stay strong, Yin added.
