ASEAN KEY DESTINATIONS
Philippine forex drops, stock roll
At the Philippine Dealing System, the peso closed at 42.75 to the dollar, gaining 26 centavos from last Friday's 43.01 finish. Traders said the peso's gain on Tuesday was a strong finish that happened only twice in the last decade.
They said this gain was last seen in June 2000 when the pair averaged 42.64 and again in May 2008 when the exchange rate averaged 42.90.
The peso got the momentum from the overall weakness of the dollar amid expectations that the US Federal Reserve would ease monetary policy, sending investors to unleash their dollar holdings.
Traders said this coupled with the start of remittance inflows.
"This is typical. When you have sound macroeconomic fundamentals, coupled with strong remittance flows, chances are your currency will appreciate. It means emerging market economies, like the Philippines, are 'less ugly' compared with the Europe and US," Marcelo Ayes, senior vice president at RCBC, said.
Traders noted a tight range when the pair stood at a high of 43, its opening level, and a low of 42.75, its closing.
The exchange rate averaged 42.87 in the morning session. Trading volume reached $1.08 billion, of which $684.30 million was recorded during the morning session.
Traders said the Bangko Sentral ng Pilipinas (BSP) was capping the pair at the 42.75 to 42.80 level, with the central bank likely to have bought at least $400 million.
In a research note, the University of Asia and the Pacific and the First Metro Investment Corp. (UA&P-FMIC) said the peso's appreciation was due to the reduced risk aversion.
They said Asian currencies are taking the upper hand against the dollar.
"Since the month started, the peso has been at P43/$1 and if this trend continues, the peso will be appreciating by another 7 percent for October," UA&P-FMIC said.
They said news circulating about the possibility of an upgrade by Moody's Investors Service of China's bond rating provided more assurance for traders.
"If ever this news materializes, then this will surely provide more positive sentiments for the whole region and will take the peso with it," UA&P-FMIC said.
Except for possible heavy profit-taking by foreign fund managers in the local financial markets, there seems to be no weighty external or internal factor that could weaken the peso, they said.
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