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THE peso slipped to the 43-to-a-dollar level on Tuesday on concerns
over rising inflation and continued investor risk aversion.
At the Philippine Dealing System, the local
currency closed to 43 against the greenback, dropping from
Monday’s close of 42.80. Trading volume more than doubled to
$715.075 million from the previous day’s $351.500 million.
“The [Bangko Sentral ng Pilipinas (BSP)] is
trying to prevent it but there was a strong demand from the
offshore, weakness of regional currencies and high inflation
outlook,” a trader said.
The BSP expects inflation to remain high until
September. Price increases accelerated to a three-year high of 8.3
percent last month due to higher oil and commodity prices.
Dealers are still reluctant to take active
positions due to inflation concerns as world crude prices hit new
highs. Moreover, increasing food prices, the approved wage and fare
hikes are still expected to fan inflation in the coming months.
Traders expect the peso to further slip to 43.15
against the dollar this week, as the current remittance inflows are
insufficient to support the local currency.
“The upside buying pressure of the dollar
remained, what with concerns over rising inflation and slowing
growth. Likewise persistent offshore buying interest kept the
greenback well supported, with dips vulnerable to buy backs,”
Metropolitan Bank and Trust Co. said in a commentary.
Metrobank said the BSP is expected to tighten
its interest rates to cap inflation. It forecast the BSP’s
overnight borrowing rate to rise to 5.50 percent this year from the
current 5 percent.
“With most Asian economies experiencing
inflation rates beyond their targets and benchmarks, the pressure is
to increase the benchmark rates and contain inflation. Not doing so
may keep the currencies weak,” Metrobank said.
“The solution to break the aforementioned
negative cycle is for central banks to rein inflation by raising
benchmark rates,” it added.
At the Philippine Stock Exchange, share prices
closed slightly higher Tuesday on bargain hunting despite continued
worries over rising inflation, dealers said.
The composite index rose 18.69 points to
2,896.15, off the day’s high of 2,903.51.
The all-share index gained 8.70 points to
1,782.54.
Advancers outnumbered decliners 71 to 29, while
65 were unchanged.
Turnover improved but remained lean at P2.7
billion from Monday’s P2.4 billion.
“The market continues to try and complete a
full recovery. But the path is fraught with pitfalls and has not
been an easy trek,” said Francisco Liboro of PCCI Securities.
“Investors are trying to accumulate stocks for
long-term positioning now that there is less pessimism about the US
economy. The sub prime [lending] issue is behind us and recent
economic data seems to be better than expected,” said Ron Rodrigo
of DBP-Daiwa Securities.
The market advanced despite oil prices staying
close to record peaks.
“High oil prices and inflation worries will
always be there to drag down the market, but long-term investors are
going beyond that. There is still more room for an upside given
attractive valuations,” said Rodrigo.
Philippine Long Distance Telephone Co. rose 0.6
percent to P2,680.
Ayala Corp. was up 1.5 percent at P350 while SM
Investments Corp. added 0.9 percent to P267.50.
Manila Electric Co. fell 1.4 percent to P69 on
lingering concerns about government pressure on the country’s
biggest power retailer to bring down its tariff rates.
San Miguel Corp. A was flat at P44 while its B
shares rose 1.1 percent to P46.
-- Maricel E. Burgonio and AFP
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