By Ruelle Albert Castro and Jimmy Calapati
The peso yesterday plunged anew, closing at a fresh record low–the 8th time this year, ahead of a US Federal Reserve interest rate decision that would set the pace of financial markets for months.
Shares at the Philippine Stock Exchange were also hammered, closing 47.22 points or 1.66 percent lower than the previous day’s session.
The broader all shares index was down 47.22 points or 1.38 percent to 3,385.52.
Losers edged gainers 151 to 39 with 33 stocks unchanged. Trading turnover reached P5.42 billion.
The peso closed at 58 to the dollar, 0.52 centavos lower than Tuesday’s 57.48. The local currency opened at 57.70, an intraday high, but later hit a low of 58. Trading turnover reached $1.05 billion.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., noted that this is the 5th day in 6 trading days that the peso closed lower.
“This could lead to higher import prices and overall inflation, as well as could lead to more aggressive local policy rate hikes to help stabilize the peso, inflation, and inflation expectations,” Ricafor said.
The policymaking Monetary Board will hold its policy stance meeting later today and economists are seeing another 50-basis points hike on the key rates of the Bangko Sentral ng Pilipinas.
The US Federal Reserve will also make its widely expected large rate hike of at least 0.75 today “that increases the attractiveness of the US currency with higher interest rate income on US dollar deposits, fixed income investments and securities.”
“The peso also weakened after the benchmark 10-year US Treasury yield posted new 11-year high of 3.60 percent on September 20, 2022, now at 3.53 percent that also increases the US dollar-denominated bond yields,” Ricafort said.
“This could lead to higher borrowing/financing costs for some listed companies,” he added.
Ricafort also noted that, since the start of 2022, the peso already depreciated by a total P7.001 or 13.7 percent from the end-2021 closing value of P50.999.
For today, Ricafort said the peso exchange rate could range between 57.85-58.05 levels with the next resistance at between 58.00-58.25 levels.
“Foreign investors in the Philippine equity markets have been selling off their holdings, and these heavy outflows have been the main contributor to the peso’s exasperated weakness recently,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“The expected half-point interest rate hike is unlikely to alleviate any pressure on the ailing peso,” Tan added.
He said the central bank has been hiking rates since the first quarter and “it’s not going to help the peso because there is a bigger macro backdrop that is driving the US dollar higher.”
Luis Limlingan, managing director at Regina Capital and Development Corp., said investors are bracing for another interest rate hike announcement from the US Fed, resulting to the sell down of the market.
Most actively traded Ayala Land Inc. was down P0.70 to P26.95. SM Investments Corp. was down P9.50 to P818.50. International Container Terminal Services Inc. was down P2.80 to P181. SM Prime Holdings Inc. was down P0.70 to P34.90. San Miguel Corp. was down P0.50 to P98. Ayala Corp. was down P5 to P698. Universal Robina Corp. was down P4.50 to P117. BDO Unibank Inc. was down P2.60 to P120.50. Bank of the Philippine Islands was down P3.20 to P93.65.
