Markets still shaken as peso rebounds

After hitting its lowest point since early 2011, the peso managed to post a rally Friday, ending four consecutive days of decline.

Also, the US Federal Reserve’s signal to end its aggressive monetary stimulus, alongside jitters over China’s economic slowdown, continued to dampen local financial markets.

The peso slumped to as low as 44.17 against the dollar at the start of the trading day before it clawed its way back to the 43-level to close at 43.72—stronger than the previous day’s rate of 43.80.

The intraday low was the weakest since February 1, 2011, when the local currency closed at 44.21 against the greenback.

The peso was at its strongest at 43.63: $1. Trading volume was lower at $1.08 billion from $1.40 billion the day before.

One trader said the Bangko Sentral ng Pilipinas (BSP), through its open market operations, had to step in to stem the decline and smooth out the volatility that had weighed on the peso the past two weeks.

Asian currencies have been falling since May 22, when US Federal Reserve chair Ben Bernanke announced that the Federal Open Market Committee would scale back its bond-buying program and put an end to its easy money policy.

In a statement on Thursday, Bernanke toned softened his stance and said that the Fed’s bond-buying program would continue but at a slower pace, taking into consideration the improvement in America’s labor and housing markets.

Yesterday, the BSP said the peso’s recent fall could have been an overreaction to the US Fed’s statements, which prompted most investors in the region to pull funds out of emerging market assets to prepare for a return to the United States.

“Once the noise settles down and once the gyrations are over, we will see that the peso value will be driven by the favorable narrative on Philippine economic prospects,” said Cyd Tuano-Amador, BSP assistant governor and head of the central bank’s Monetary Policy Sub Sector.

At the Philippine Stock Exchange, the main-share index lost 144.5 points, or 2.28 percent, to close at 6,182.17, weakening for a third straight session.

The local bourse tracked the decline in most markets across the region.

The index lost 60.09 points, or close to 1 percent, during the entire trading week, marking a stark decline from last week’s finish of 6,242.26.

All counters were in the red but the mining/oil counter was the most battered during the day, dipping by 9.55 percent due to the sharp decline in Semirara (-11.54 percent) and Philex (-11.42 percent). Dealers said the drop reflected the slump in global commodity markets.

Foreign investors continued to pull out funds from the local market, resulting in a net foreign selling of about P2.27 billion for the day. Total net foreign selling amounted to P9.12 billion, while there had been a net buying of about P6.85 billion, based on PSE data.

Other big index decliners were RLC (-10.67 percent), AP (-9.94 percent), MWC (-8.84 percent), EDC (-7.63 percent), FGEN (-5.98 percent), Megaworld (-5.93 percent), JG Summit (-4.41 percent) and SM Prime (-3.94 percent).

Value turnover was heavy at P12.97 billion. There were over four decliners for every single gainer at the market.