ASEAN KEY DESTINATIONS
Peso sinks on Fed decision to cut bond purchases, but 4Q GDP trims losses
The peso slipped against the dollar after the US Federal Reserve trimmed its bond purchases by another $10 billion, sending chills to emerging markets that were already enduring volatility from a host of reasons.
However, the steady growth of the Philippine economy in the fourth quarter of 2013 gave the local currency platform to trim losses against the greenback.
The local currency lost 11.5 centavos to 45.32:$1 from 45.205 Wednesday. It opened at 45.33 before trading between a low of 45.42 and a high of 45.275 during the session.
The weakness is mostly sentiment-driven following Fed's taper announcement overnight, Metropolitan Bank & Trust Co. research head Ildemarc Bautista told GMA News Online.
"People are just reacting to the Fed taper. Markets might be misreading the Fed's action as tightening when in reality it's still pumping liquidity into the system," he said.
Fed chairman Ben Bernanke, who hands the central bank reins over to vice chair Janet Yellen on Friday, announced a further $10 billion reduction in its monthly bond purchases as it stuck to a plan to wind down the extraordinary stimulus despite recent turmoil in emerging markets, Reuters reported.
"We have to find out how to control sentiment. Dollars are still coming in even if demand for the dollar will wane," Bautista said.
Following Fed's announcement, corporates bought dollars, a trader at a local bank said in a separate phone interview.
Also Weighing down on investor sentiment was China's lower manufacturing production for January, the trader added.
The Markit/HSBC final manufacturing PMI – a measure of Chinese manufacturing sector activity – for January dipped to 49.5 from December's 50.5, the first deterioration in six months and a reading below 50 indicates a contraction, Reuters reported.
However, the trader noted the peso received a little help when government announced the economy grew at a decent pace in the fourth quarter.
"Some took profits on GDP (gross domestic product) announcement and also because of the long weekend," the trader said.
The Philippine Statistics Authority (PSA) reported the GDP grew by 6.5 percent in October to December despite a series of natural calamities, placing the full-year 2013 output as growing by 7.2 percent.
"Some investors are now starting to cherry-pick markets, distinguishing the good emerging markets from the bad," the trader said. – VS, GMA News
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