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By Maricel E. Burgonio, Reporter
DESPITE strong overseas
remittance inflows, the peso closed weaker on Wednesday as the
dollar strengthen while investors remain cautious about rising
inflation and the government’s fiscal position.
At the Philippine Dealing System,
the peso closed at 42.855 against the greenback, falling from
Tuesday’s finish at 42.660. Trading volume reached $594 million,
down from $850.8 million the day before.
Traders said rising inflation and
a looming wage increase have discouraged investors from peso
denominated assets.
A wage increase of more than the
inflation rate of 8.3 percent in April will further drive away
investors, they said.
“Investment in peso denominated
assets is at risk,” Marcelo Ayes, Rizal Commercial Banking Corp.
senior executive vice president said.
Ayes said the local currency is
expected to break into the 43-to-a-dollar level within the week, but
remittance inflows may prop up the local currency at 42.50.
“Besides risk aversion, the US
dollar is strong and Asian currencies are also weak,” he said.
“The market also expects the
government not to meet its balance budget target,” he added.
In a market commentary,
Metropolitan Bank and Trust Co. (Metrobank) said the expected
remittance flows failed to make a dent on negative sentiment for the
peso.
“With Philippine assets off
investors’ radar screens, the peso would continue to remain weak.
However, we expect prices to consolidate within the 42.30 to 42.70
range, barring any major developments. A break of 42.30 targets 42
to 42.10 level; a break of 42.70 targets 42.90 to 43.00 level. The
central bank is again expected to smoothen volatility,” Metrobank
said.
The market expects the Bangko
Sentral ng Pilipinas (BSP) to increase its rates by 50 basis points
in the next six months to a year from the currently 5 percent and
5.75 percent, for the overnight borrowing and lending windows,
respectively.
At the Philippine Stock Exchange,
share prices closed 0.5 percent higher Wednesday on continued
bargain hunting, with the index hitting its highest level in more
than three weeks, dealers said.
But record-high oil prices
prompted caution, with select blue chips including conglomerate
Ayala Corp. retreating after recent gains.
The 30-company composite index
rose 13.24 points to 2,862.53, its best finish since April 21 when
it settled at 2,890.92.
The all-share index was barely
changed at 1,763.58 from 1,763.73 on Tuesday. There were 44
advancers and 42 decliners, while 68 stocks were unchanged.
“Investors are attracted to
companies that performed well in the first quarter and are seen
weathering the storm this year,” said Astro del Castillo of First
Grade Holdings.
Concerns about accelerating
inflation, which is expected to crimp consumer spending, capped
gains, the dealers said.
“We were hoping that oil prices
would continue its pullback. But it hit a new high, so there’s
renewed concern about inflation,” said Rommel Macapagal, of
Westlink Global Equities.
Crude oil prices were slightly
lower in Asian trade on Wednesday after striking an all-time high
near $127 despite a forecast for slower energy demand growth,
analysts said.
The benchmark contract jumped to
a record $126.98 before settling at $125.80 on Tuesday at the New
York Mercantile Exchange. The contract had risen $1.57 at the close.
--With AFP
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