Peso waxes, wanes on shifts in global oil prices
By Doris Dumlao
Philippine Daily Inquirer
First Posted 03:10:00 07/25/2008
MANILA, Philippines—The peso took a roller-coaster ride Thursday on the currency spot market, breaching the 44-per-dollar mark and hitting an intra-day high of 43.83 in early trade, and closing at 44.23 on heavy profit-taking.
News of softening oil prices across the globe had a telling effect on the peso’s performance.
“In the past few days, there was a change in market sentiment because of the drop in oil prices,” said Chinatrust Commercial Bank Philippines treasurer Roland Avante. “There has always been a strong correlation between oil prices and the US dollar, so there was a sell-down on the US dollar.”
The financial markets cheered the fall in oil prices, which had hit about $124 per barrel from the record-high of about $147 per barrel seen in previous weeks.
Avante said currency traders also took comfort from a signal from the central bank, Bangko Sentral ng Pilipinas (BSP), that it wouldn’t hesitate to further jack up interest rates to prevent runaway inflation.
The BSP last week raised its benchmark interest rate, the overnight borrowing rate, by a hefty 0.50 percentage point to 5.75 percent, bringing the total increase to 0.75 point over the past two months.
But the dumping of dollars was “overdone so there was profit-taking against the peso afterward,” Avante added.
The peso’s gains early in the day were thus wiped out at the end. The peso shed 0.21 from Wednesday’s close of 44.02 to the dollar.
The volume of trading fell to $884 million from Wednesday’s hefty turnover of $1.5 billion.
BSP Governor Amando Tetangco Jr. said the peso’s apparent recovery was a favorable reaction to the drop in oil prices.
At a recent forum, Tetangco noted that the Philippines used to import about $110 million barrels of oil a year but had since trimmed its dependence on oil as energy source to about 36 percent of total needs.
The peso has now depreciated against the dollar by about 6.7 percent since the start of the year. With editing by INQUIRER.net
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