MANILA, Philippines—The peso Thursday weakened past 48 to the dollar and the Philippine Stock Exchange index fell 5.18 percent amid growing fears of a global recession.
The peso fell 0.49 from Wednesday’s closing rate of 47.61 to the dollar. After opening at the day’s high of 47.75I, it closed at the day’s low of 48.10, its weakest finish since ending at 48.17 on April 3, 2007.
The peso has fallen 14 percent so far this year and become one of Asia’s worst-performing currencies.
As US stocks posted a steep decline, panicky investors dumped stocks, bonds and currencies from emerging markets and shifted to US dollars when Asian markets opened.
“The worst is not yet over. Probably it’s just the start,” said Eddie Gobing, president of Lucky Securities Inc.
Jonathan Ravelas, chief strategist at Banco de Oro Unibank said, “It’s due to renewed risk aversion and the possible vulnerability of overseas Filipino remittances added to the uncertainty.”
While overseas Filipinos’ cash remittances have given the country a steady flow of foreign exchange over the past few years, those inflows are expected to weaken as the global economy is on the cusp of a major downturn.
The remittances through banks grew 10.4 percent year-on-year in August, slowing from 24.6 percent in July, according to central bank data. [Read story]
Ravelas said the next resistance to the dollar’s further rally against the peso would be at 48.50.
The stock market decline “was driven by the volatility in offshore markets,” said Jose Emmanuel Hilado, treasurer at Rizal Commercial Banking Corp. “So as stock prices were going down, sentiment on the foreign exchange market also weakened.”
Stocks grew pale at the opening bell, knocked over by a 733-point drop on Wall Street on Wednesday, on fears of a prolonged US economic contraction as signaled by frail retail sales.
The Philippine Stock Exchange index (PSEi) fell 116.04 points to 2,122.37. The broader All Shares index dropped 63.32 points, or 4.4 percent, to 1,364.45.
Value turnover was P2.3 billion, with two billion shares changing hands. Losers outnumbered gainers 119 to five, and 18 stocks closed unchanged.
As of 9:31 a.m., a minute after the market’s open, the PSEi skidded 2.9 percent or 66.97 points to 2,171.44.
Asian stocks in general posted sharp losses Thursday, with main Asian indices plunging by as much as 10 percent.
Global investors were wracked by data showing that US retail sales fell 1.2 percent in September, almost double the 0.7-percent decline analysts had expected.
Other data, released by the US Federal Reserve Bank, indicated the economy continued to slow as financial and credit market problems took a turn for the worse.
The numbers were ominous signs that the US, a critical export market for Asia, was sliding into recession.
“Absent any market moving news, investors’ trades will be taking its cue from this development,” said Justino Calaycay, trader at Accord Capital Equities. “Foreign selling may still dominate trades and keep local investors on the sidelines.”
“We remain on a roller-coaster ride, no thanks to signs that the world is indeed headed toward a recession,” said Astro del Castillo, First Grade Holdings managing director.
“One positive thing about the market’s performance is the very thin trade we saw today,” he said. “This to me is an indication that most investors, while cautious, wouldn’t want to join the rush.”
Hilado said the domestic financial market wasn’t really expecting the peso’s exchange rate to breach the 48-per-dollar mark, as sentiment had turned quite positive in the last few days after the US government announced plans to infuse fresh capital into ailing financial institutions.
But when US stocks fell sharply, the market also sold the peso down, he said.
“Without the external factors, the peso should be at around 46.50” to the dollar, Hilado said, noting that the currency was undervalued at its current levels.
The trading volume on the currency spot market surged to $992.5 million from $754.43 million on Wednesday. Some currency dealers said the central bank unloaded dollars to temper the peso’s depreciation.
The peso is now trading way beyond the 42-45 range to the dollar assumed by the government for purposes of budgeting and macroeconomic planning. Edited by INQUIRER.net
