The Market Monitor Minding the Nation's Business
By Riza Lozada
Uncertainties on policies that the US government will implement under US President Donald Trump and the dovish statement by Federal Reserve chairperson Janet Yellen, led to mixed results for the Philippine peso and the local bourse.
The local currency ended the week sideways to the greenback at 49.92 from 49.98 last Thursday, which a trader attributed to Yellen’s comment on a gradual increase in the Fed’s key rates.
The local unit once again touched the P50 level to a US dollar last Friday.
Yellen doused fears about a heating labor market, which she said is not a factor for the Fed to immediately raise rates.
”The peso was in line with other currencies in the region but it did not improve that much since all eyes are on Trump’s inaugural,” the trader said.
With this combination of factors, the peso opened the day at 49.95 from 50.00 a day ago. It traded between 49.98 and 50.00 resulting in an average of 49.90. Volume of trade reached $716.7 million, higher than the $560 million a day ago.
The currency is seen to trade between 49.60 and 50 per dollar next week.
The Philippine Stock Exchange index (PSEi) also ended its five-day rally after losing 0.19 percent, or 13.42 points, to 7,232.66 points.
However, the All Shares index rose 0.08 percent, or 3.42 points, to 4,365.63 points.
It was also mixed results for the sectors, with Property, Services, Mining and Oil, and Financials registering increases of 1.10 percent, 0.96 percent, 0.12 percent, and 0.002 percent, respectively.
Meanwhile, Industrials declined by 1.19 percent, and Holding Firms by 0.36 percent. Volume of trade reached 2.52 billion shares amounting to P5.69 billion. Advancers led decliners at 94 to 84 while 45 shares where unchanged.
A ranking Bangko Sentral ng Pilipinas (BSP) official, however, said the peso, despite its recent weakness, remains firm because of the country’s strong macroeconomic fundamentals.
”We should emphasize that for an economy experiencing good external payments position the depreciation of the peso in 2016 and so far in 2017 is definitely market sentiment trade,” said BSP Deputy Governor Diwa Guinigundo.
Guinigundo cited that average deprecation rate of the peso in 2015 to 2016 is about 10 percent, lower than the more than 23 percent depreciation of the Malaysian ringgit and the 11 percent drop of the Chinese yuan.
He said the latest weakness of the peso is inconsistent against the continued strengthening of the country’s macroeconomic fundamentals, the robust expansion of the economy, improvement of public finance, low inflation environment and strong external payments position.
He pointed out that sans the expectation of at least three increase in the Fed rates this year, among others, “I think it will be the market fundamentals that will be more dominant in driving the exchange rate.” ”In other words it is market-driven sentiment,” he said.
Meanwhile, Guinigundo said Fed rate hike expectations this year and the possible approval of the Department of Finance’s (DOF) tax reform proposals have been factored in in the BSP’s inflation forecasting.