Peso drops to 41-to-dollar level in reaction to Cyprus crisis

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11:12 PM March 26th, 2013

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By: Michelle V. Remo, March 26th, 2013 11:12 PM

MANILA, Philippines—The peso fell back to the 41-to-a-dollar territory on Tuesday to hit its lowest level for the year as the crisis in Cyprus spooked markets anew.

The local currency closed at 41.07 against the US dollar, down by 24 centavos from the previous day’s finish of 40.83:$1.

Intraday high hit 40.84:$1, while intraday low settled at 41.08:$1.

Volume of trade reached $935.76 million from $664.944 million previously.

The depreciation of the peso came amid market concerns that the bitter pill that Cyprus has to swallow to resolve its crisis could cause too much adverse effects on the country’s financial sector, and eventually to the entire euro zone and the global economy.

Cyprus and international creditors have agreed that a bailout package will be made available for the former. However, Cyprus must implement reforms and its own-revenue raising measures for the assistance to be extended. One of these measures is making depositors share the burden of resolving the crisis. In particular, a significant portion of money placed as bank deposits should be surrendered as contribution of the public.

Traders said the impact on depositors and the financial markets of thia revenue-raising measure has created concerns that the same may be implemented in other euro-zone economies facing debt problems.

The market players said uncertainties in the global economy resulting from the events in Cyprus made many investors turn away from emerging-market assets, such as peso-denominated ones, and to the US dollar that has always been considered the safest and liquid currency.

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