Peso, stock market post losses ahead of decision announcement from FOMC, BSP

By Joann Santiago

MANILA, June 18 (PNA) — Anticipations on the would-be decision of the US’ Federal Open Market Committee (FOMC) and the Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) made both the peso and the local bourse end the day on the weak side.

The peso shed P0.25 to end the day at P44.12 from the previous day’s P43.87.

”This is a risk averson move due to Middle East woes,” said BDO chief strategist Jonathan Ravelas.

The local unit’s closing level is its weakest for the day after opening at P44.02, which is also weaker compared to day-ago’s opening level of P43.94.

It’s strongest level for the day hit P43.96 bringing the day’s average to P44.01.

Volume of trade reached US$ 669.5 billion, slightly higher than day-ago’s US$ 571.3 million.

A trader told PNA that announcements to be given after the respective policy meetings of the FOMC on Wednesday night (Manila time) and the MB on Thursday play a big role in the currency pair.

A US$ 10 billion fresh cut in the Federal Reserve’s stimulus program is already expected but a rate hike within the year has been discounted given the erratic performance of the US economy, the trader said.

On the local front, the BSP is widely expected to announce either another 100 basis points increase in banks’ reserve requirement or a 25 basis points increase in the key rates.

Since the start of the year, the Board has implemented a total of 200 basis points increase in banks’ reserve requirements in the bid to mop up excess liquidity in the economy as growth of domestic liquidity or M3 remain elevated at over 30 percent.

On the other hand, the central bank’s overnight borrowing or reverse repurchase (RRP) rate is at record-low of 3.5 percent and the overnight borrowing or repurchase (RP) rate is at 5.5 percent.

These were last adjusted in October 2012 when the Board slashed it by another 25 points to bring the total cut in 2012 to 100 basis points, all of which were aimed at supporting domestic growth on back of low inflation environment.

For Thursday, the peso is projected to trade between P43.80 and P44.20.

Similarly, the Philippine Stock Exchange index (PSEi) lost 0.03 percent or 1.80 points to 6,703.13 points.

There were mix performance among the indices with mining and oil leading the gainers after posting an increase of 0.80 percent or 121.35 points to 15,377.69 points.

The other sub-indices that posted improvements are the holding firms and financials.

On the other hand, the all shares index, the industrial, services and property ended the day on the red.

Volume of trade remained thin with only 1.73 billion amounting to P7.18 billion.

Losers led gainers at 125 to 53 while 43 were unchanged. (PNA)