Market unleashed its pent-up emotions Tuesday following the forced three-day weekend courtesy of Karding, which by the way salud to NDRRMC (National Disaster Risk Reduction and Management Council) for its constant reminder that in turn prepared those living along Karding’s path, thus lessening the number of victims.
Suddenly, all hell broke loose with the peso, a few moments after the opening, flirted to P58.995, drawing close to the predicted P60 to a dollar.
The bourse also took a similar slump, nearly crossing the 6,000 mark as investors continue to sell out with risk aversion was the prevailing attitude.
The bourse, pun intended, is actually going with the “ber” month trend. The stock market has entered into bear territory. It’s almost a déjà vu. As I write this piece, exactly on the very same date six years ago, the Philippine Stock Index (PSEi), before the market went on lunch recess, was in the negative territory.
On that very same day six-years ago, the peso, likewise, suffered another lashing hitting and intra-day low of P48.40 to a dollar. Movements in both are co-related, largely influenced both by onshore and offshore events and a bit of policy-pronouncements.
Still, there’s no change in the rationale behind the developments in the bourse and the automated trading of the local currency vis-à-vis the green, six years ago to now.
Fear of FED (US Federal Reserves) hike is the same underlying reason. Taking stock of the developments in the local and international fronts, market movers, players and analysts all point to a confluence of events pulling down both Psei and local currency – flight to capital and/or investors are taking the sideline because of the narrowing income margin as the US Fed signals that additional rate increases is in the horizon.
Naturally, the pull-out from the stock market has a cascading effect on the local currency as demand for dollars increases, resulting in the peso gyrating. Here’s the thing: with the “bear-y” market, the monetary authorities have instituted stricter measures to determine the underlying principle of a depreciating peso.
The buzz going around the banking corridor is that the Bangko Sentral ng Pilipinas (BSP) is demanding banks to submit documents that would support their forex transactions on the very same day.
“Documents must be submitted within the day.” For an ordinary individual, buying dollars to hedge for a future trip may be a bit tedious. While previously it’s relatively easy, now, buyers must show proof of travel like an airline ticket.
But, wait, there’s one more. Not to be content, a muted source shared that the BSP has farmed out, let loose, its bank examiners for a spot check on selected financial institutions heavy on dollar transactions.
A falling currency does not sit well with the economic managers, particularly the monetary authorities since stability in the macroeconomic fundamentals is their foremost concern.
But for the overseas Filipino workers and their beneficiaries, it meant incremental money, which some say may boost consumer spending and in turn could perk up the domestic economy.
This could mean lower dollar remittances as there will be more peso for lesser green. Alternatively, however, the incremental value is eaten up by inflation or the uptick in the prices of commodities.
With the peso churning to its historic low, the buzzword in the market is the possibility that the BSP may make a surprise move, an off-cycle decision to thwart the currency from slumping to P61.80 in the coming days.
But with the strict requirements and the spot check, the off cycle move may no longer be on the horizon for now since the peso is back to the highs of P58 with minimal demand.
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