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By Chino S. Leyco, Reporter
DESPITE the Bangko Sentral ng Pilipinas’ (BSP)
intervention in the spot market, the peso on Tuesday fell through
the 45-to-a-dollar level on rising fears of runaway inflation after
the central bank’s warning Monday that consumer price increases
last month accelerated to the double-digit mark.
Local traders said the BSP intervened
intermittently in the spot market, selling dollars for 44.99 in a
process called sterilization, to temper the peso’s fall.
At the Philippines Dealing System, the local
currency ended the day at 45.01 against the dollar, the lowest
finish since October last year. From Monday’s P504.5 million,
trading volume surged to P811.5 million, reflecting the BSP’s
heavy intervention.
The central bank earlier said June inflation may
have accelerated further to a range of between 10.4 percent and 11.2
percent on the back of surging world oil prices, which caused
domestic pump prices to climb and Filipinos to seek higher wage and
cost of living allowance adjustments.
BSP Deputy Governor Armando Suratos said
increases in the prices of rice, fruits and vegetables bolstered the
central bank’s expectations of higher inflation last month.
“Higher cost of imported commodities [was] due
to [a] depreciating peso,” he said.
The Development Bank of Singapore said the
release of the June inflation data later this week is likely to keep
sentiment in Asian markets bearish, as prices are expected to have
risen sharply last month.
“The Philippines and central banks already are
in inflation fighting mode. Because of rising inflation and
weakening currencies, sentiment in [the] bond market is likely to
remain downbeat in the near-term, even if US Treasuries continue to
eke out gains amid weakness in US equity markets,” the
Singa-porean bank said in a note.
BSP Governor Amando Tetangco Jr. however, said
the peso will recover in the fourth quarter of the year, as it
“continues to have support from [the country’s] favorable
external payments position.”
The BSP earlier cut its forecast for foreign
direct and portfolio investments, as well as the country’s balance
of payments surplus. It also estimated a wider trade deficit this
year, as the country’s main export market, the US, slows down amid
rising costs of imported fuel and other commodities.
The Development and Budget Coordinating
Committee has set a peso forecast of 42 to 45 against the dollar
this year.
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