MANILA – The main stocks index recovered on Tuesday amidst expectations for another hike in the Federal Reserve’s key rates but the peso posted a fresh all time-low against the US dollar, its seventh so far this year.
Although the local currency sustained its sideways close against the US dollar and finished Tuesday at 57.48 from 57.4 a day ago, its latest close is the weakest to date.
It opened the day’s trade at 57.4 and traded between 57.5 and 57.355. The average level for the day stood at 57.42.
Volume rose to USD967 million from USD508.4 million a day ago.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said the local unit even touched a low of 57.50 mid-trade during the day.
He said the local currency surpassed its 56.45 all-time low last Sept. 2 when it closed the day at 56.77.
This was followed by the 56.999 on Sept. 5; 57.00 on Sept. 6; 57.135 on Sept. 7; 57.18 on Sept. 8; and 57.43 on Sept. 16.
“The US dollar/peso exchange rate posted a new record ahead of the widely expected large/jumbo Fed rate hike of 0.75-1.00 on Sept. 21, 2022 that increases the attractiveness/allure of the US currency with higher interest rate income on US dollar deposits/fixed income investments/securities,” Ricafort said.
He added the rise of US’ 10-year Treasury yield to its new 11-year high of 3.52 percent last Sept. 19, which slipped to 3.51 to date “also increases the US dollar-denominated bond yields.”
Another factor for the weaker peso is the deficit in the country’s balance of payment (BOP) position as of end-August to USD5.492 billion, five times lower compared to the USD253 million deficit in the same period in 2021 due to higher trade deficit.
Ricafort forecasts the peso to trade between 57.35 to 56.55 to a US dollar on Wednesday.
After declining for several days, the Philippine Stock Exchange index (PSEi) gained 0.17 percent, or 11.04 points, to 6,448.46 points.
All Shares followed with a jump of 0.20 percent, or 6.74 points to 3,432.74 points.
Most of the sectoral gauges also gained during the day, led by Financials with an uptick of 0.80 percent.
It was trailed by the Mining and Oil index, 0.40 percent; Industrial, 0.31 percent; Services, 0.22 percent; and Property, 0.05 percent.
Only Holding Firms finished the day in the negative territory after it slipped by 0.40 percent.
“Philippine shares ended the day with a modest rebound ahead of another rate hike from the Fed (Federal Reserve),” said Luis Limlingan, Regina Capital Development Corporation (RCDC) head of sales.
The Federal Open Market Committee (FOMC) will have its two-day meeting starting Sept. 20 and it is widely expected to announce another rate hike as US’ inflation rate remains elevated.
“The street bets that the central bank will adjust the benchmark rate by 75 basis points on Wednesday,” Limlingan said.
The consumer price index (CPI) in the US decelerated to an annual growth of 8.3 percent last August from the previous month’s 8.5 percent, higher than expectations of an 8.1 percent print.
The markets thus expect the Fed to remain aggressive on its policy rate normalization to bring down the CPI to its long-run 2 percent target.