MANILA – The peso closed at its strongest for more than 3.5 years against the US dollar on Wednesday while the Philippine Stock Exchange index (PSEi) rose anew partly on better manufacturing data for June 2020.
The local currency finished the day’s trade at 49.075 from 49.095 Tuesday.
It opened the day at 49.05, sideways from its 49.12 start in the previous day.
It traded between 49.08 and 49.01, resulting in an average of 49.054.
Volume totaled to USD699.71 million, higher than the previous day’s USD470.35 million.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said the local currency ended Wednesday at its strongest since November 11, 2016, when it finished the trade at 48.95.
He traced this to the “pick up/improvement in manufacturing data and narrower trade deficit data.”
The Philippine Statistics Authority (PSA) on Wednesday reported that the production index in June 2020 dropped by 22.5 percent, better than the 31.2-percent contraction last May. It declined by 7.7 percent in June 2019.
Exports contracted by 13.3 percent last June, lower than its 26.9-percent decline in the previous month.
Imports also showed improved numbers with -24.5 percent last June from -40.6 percent the previous month.
In terms of inflation, which posted an acceleration to 2.7 percent last July from month-ago’s 2.5 percent, Ricafort said implementation of the 15-day modified enhanced community quarantine (MECQ) in the National Capital Region (NCR), Bulacan, Laguna, Cavite and Batangas since August 4 “may reduce business/economic activities as well as ease inflation/price pressures.”
“Markets also anticipating latest 2Q (second quarter) 2020 GDP data for tomorrow, as any bigger contraction in GDP, as well as the MECQ, could increase the possibility of more monetary easing measures such as by way of further cut/s in banks' RRR (reserve requirement ratio), as may be needed most by the economy at this time,” he said.
Authorities and economists alike expect a greater economic contraction in the second quarter this year since the enhanced community quarantine (ECQ) was implemented in Luzon from March 17 to May 15, while it was extended until end-May for NCR.
Luzon accounts for about 70 percent of the country’s annual output.
The PSA on Wednesday reported the revised gross domestic product (GDP) figure for the first three months of the year at -0.7 percent from the initial figure of -0.2 percent.
Economic managers have revised their GDP target for this year to a contraction of 2 to 3.4 percent.
Aside from domestic factors, Ricafort attributed the peso’s rise to the general weakness of the greenback, which posted its “lowest levels in more than two years amid some improvement in global market risk appetite that sent US stock markets to the highest in about five months and Nasdaq to new record highs, after a high-level meeting between US and China scheduled on August 15, 2020, on compliance by China on the trade deal/agreement made in January 2020.”
“Positive developments on possible Covid-19 vaccines also supported global market risk appetite, overshadowing concerns over the recent spike in new Covid-19 cases in some US states and countries,” he said.
He forecasts the currency to trade between 48.95-49.15 to a US dollar on Thursday.
Meanwhile, the main equities index rose for the second day in a row with a jump of 1.006 percent, or 58.08 points, to 5,833.58 points.
All Shares increased by 0.86 percent, or 29.32 points, to 3,456.29 points.
The sectoral indices were led by Mining and Oil, which rose by 3.32 percent.
It was trailed by the Financials, 2.60 percent; Property, 1.24 percent; Services, 1.13 percent; Industrial, 0.81 percent; and Holding Firms, 0.14 percent.
Volume totaled 2.04 billion shares amounting to PHP5.4 billion.
Gainers led losers at 128 to 75, while 27 shares were unchanged.
Ricafort said PSEi ended the day’s trade at its “highest since July 30, 2020, but still among two-month lows, after the improvement of the latest economic data on manufacturing, exports, imports, and trade balance.”
He forecasts the next support level to be around 5,700-5.800. (PNA)
