The peso hit a fresh closing low yesterday, its seventh since the start of the year, ahead of the expected large rate hike of the Federal Reserve.
The peso closed at 57.48 to the dollar, down from 57.40. The currency opened at 57.40, hitting a high of 57.355 and a low of 57.50. Trading turnover reached $967 million.
Share prices ended up Tuesday as the market tracked the overnight uptick in Wall Street. The peso closed down.
The Philippine Stock Exchange index (PSEi) was up 11.04 points, a 0.17 percent hike to 6,448.46.
The broader all shares index was up 6.74 points or 0.2 percent to 3,432.74.
Gainers edged losers 94 to 82 with 55 stocks unchanged. Trading turnover reached P4.75 billion.
Michael Ricafor, RCBC chief economist, said that since the start of 2022, the peso has already depreciated by a total of P6.481 pesos or 12.7 percent compared to its closing value of P50.999 in end-2021.
“The US dollar/peso exchange rate posted a new record high ahead of the widely expected large Fed rate hike of 0.75-1.00 (tomorrow) that increases the attractiveness of the US currency with higher interest rate income on US dollar deposits, fixed income investments and securities,” Ricafort said.
He explained that the peso also weakened after the benchmark 10-year US Treasury yield posted new 11-year high of 3.52 percent yesterday, now at 3.51 percent that also increases the US dollar-denominated bond yields.
“The peso also weaker after the balance of payments (BOP) deficit data from January-August 2022 widened by more than 5 times compared to the same period last year.
May be largely brought about by the significantly wider trade deficits as imports have been bloated by elevated global commodity prices earlier this year largely attributed to the Russia-Ukraine war since Feb. 24, 2022 as well as the further re-opening of the economy towards greater normalcy that also led to some pick up in imports,” Ricafort said.
He said the next resistance levels will be at 57.50-57.75 with immediate support at 57.00-57.25.
Most Asian currencies were subdued on Tuesday as investors braced for a sizeable US Federal Reserve interest rate hike this week to combat inflation, while regional equities edged up tracking a Wall Street rebound, Reuters reported.
South Korea’s won bucked the regional trend to strengthen 0.4 percent as the currency, described by some analysts as equity-sensitive, gained on a rebound in Asian share markets, while Malaysia’s ringgit hit a fresh 24-1/2 year low to lead losses among regional currencies.
The yen was down 0.1 percent at 143.38 on Tuesday.
Higher interest rates have caused a sell-off in government bonds, with the yield on benchmark 10-year Treasury notes hovering near their highest levels since 2011, on the prospect of the Fed raising rates more aggressively and for a longer period of time than previously anticipated, as inflation remains near multi-decade highs.
Higher yields aided the dollar’s strength, which remained firm below a two-decade high versus major peers, and the dollar’s and yields’ persistent rise has weighed heavily on riskier Asian assets.
Luis Limlingan, managing director at Regina Capital and Development Corp., said the market posted an uptick ahead of an expected hike from the Fed.
“The FOMC will kick off its two-day meeting on Tuesday. The street bets that the central bank will adjust the benchmark rate by 75bps on Wednesday. Meanwhile, Moody’s Analytics sees the BSP to stay with its aggressive fight against soaring inflation. In line with this, it expects the central bank to push the benchmark rate by another 50bp to 4.25 percent on September 22, 2022,” he said.
Claire Alviar, analyst at Philstocks Financial Inc., meanwhile said the market also tracked the overnight uptick in Wall Street.
Investors also took to bargain hunting as the PSEi stayed in the 6,400 support.
Most actively traded Synergy Grid and Development Philippines Inc. was down P0.90 to P12.32. SM Investments Corp. was down P7 to P828. Ayala Land Inc. was down P0.35 to P27.65. San Miguel Corp. was up P0.05 to P98.50. SM Prime Holdings Inc. was up P0.40 to P35.60. BDO Unibank Inc. was up P2.60 to P123.10. International Container Terminal Services Inc. was up P1.80 to P183.80. PLDT Inc. was down P21 to P1,639. Puregold Price Club Inc. was down P1.15 to P30.20. Bank of the Philippine Islands was up P0.85 to P96.85. – Jimmy Calapati, Ruelle Castro, Reuters
