Peso, stocks fall on Fed rate hike hint

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The peso and domestic stocks ended lower on Thursday, tracking regional markets, on reports that the US Federal Reserve could finally start raising interest rates before the year ends.

The currency dropped to P46.90 per dollar, losing 14 centavos from Wednesday.

Thursday’s finish was the weakest since September 29 when the peso slid to P46.93.

The Philippine Stock Exchange index (PSEi), meanwhile, lost 100.01 points or 1.37 percent to close at 7,189.25, while the wider All Shares index shed 45.86 points or 1.10 percent to 4,143.39.


“The market went down because people are speculating that there will be a hike in interest rates. The Fed hinted that they are considering to hike it,” said Aristotle Reyes Jr., equities trader at UPCC Securities Inc.

He added that profit-taking likely also contributed as the market had been going up in previous days.

Global markets, roiled earlier this year over the likelihood of a Fed rate hike, had settled recently given a consensus view that the US central bank would delay the increase to early next year.

On Wednesday, the Fed decided to keep policy rates steady but pointed to a rate hike during its next meeting in December.

Metropolitan Bank and Trust Co.’s (Metrobank) research arm said the Fed had set a hawkish tone that boosted the US dollar.

“The Fed is also ‘reasonably confident’ that inflation will return to 2 percent target, and that it will consider a rate increase at the December meeting, leaving the door open for policy normalization,” Metrobank Research said.

UPCC Securities’ Reyes said, “I think for now there will be no rate hike. But it is better if the Fed proceeds with it so that we could move on. We’ll just do range trading as long as the rate hike is not happening.”

He added that over the next days to November, the market would still track domestic third quarter earnings releases.

Luis Limlingan of Regina Capital Development Corp. said that aside from a Fed move, “the market is also jittery as they [investors]also await the Bank of Japan’s decision on how to address an economy sputtering back to a deflationary environment.”

All sub-sectors declined on Thursday, with property firms down the most at 2.32 percent.
Trading amounted to 1.257 billion shares valued at P6.52 billion. Decliners exceeded advancers, 106 to 57.

On Wednesday, the PSEi pulled back 36.50 points or 0.49% to close at 7,289.26, while the all-shares index slumped 12.29 points or 0.29% to finish at 4,189.25.

The peso, meanwhile, opened at P46.89 to $1 on the Philippine Dealing System (PDS) before trading between P46.83 and P46.93.

Total volume transacted rose to P983.946 million from P473 million.

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