SUMMARY
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MANILA, Philippines (UPDATED) – The local currency sank past 44 to the US dollar on Friday, June 21, its lowest in over about two years as investors react to the US Federal Reserve’s announcement that an end to their pump-priming strategy is in the offing.
The peso opened P44.00 against the US dollar in the morning, trading within the P43.64 to P44.17 range. This is the weakest point it hit since February 2011. Without Friday’s gain, its fall in the past 5 days would have been the steepest in the last 3 years.
It eventually closed 8-centavos stronger at P43.72 to a dollar from its 17-month low P43.80 finish on Thursday, June 20.
Dollars traded amounted to $1.084 billion, down from $1.407 billion the previous day.
Foreign portfolio or “hot” money continues exiting from emerging markets, including the Philippines, amid expectations that the US will soon cut its monthly bond purchases, prompting investors to divert funds back to the US.
A weak peso hikes the equivalent funds that Filipinos working overseas remit home, as well as the earnings of exporters and business processing outsourcing firms. These 3 are the key sources of growth of the Philippines, which had a stellar 7.8% performance in the first quarter.
On the flip side, strong dollar means importers will have to shell out more pesos to settle shipments.
The peso was the best-performing Southeast Asian currency in 2012. – Rappler.com
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