The peso almost touched the all-time low of 56.45 to $1 during intraday trading but managed to recover towards the end of the trading session, closing at 56.10 or 18 centavos higher than Thursday’s close of 56.28 to the dollar. The peso dropped to as low as 56.44 during intraday trading, its weakest since Oct. 15, 2004. Yesterday’s volume was heavy at $429 million.
The Bangko Sentral ng Pilipinas (BSP) said it is closely monitoring developments in the market, warning that it is ready to take measures to curb excessive speculation if necessary.
BSP Governor Amando M. Tetangco Jr. said the Monetary Board is ready to take further action should it become necessary, even shortly after adjusting its reserve requirements for banks. "The BSP is not involved in politics so let the market be warned that we are here monitoring the situation, we are watching," Tetangco said.
The increase in banks’ reserve requirements was intended to mop up liquidity from the market that Tetangco said has found its way into the foreign exchange market and created inflationary pressures.
Traders said sentiments in the currency market are not likely to improve until there is a clearer indication of when the turmoil would be resolved.
The resignation of eight top Cabinet members initially sent the peso down after about one hour of trading but later developments indicating possible transition actually put a positive spin on the peso-dollar exchange rate.
National Treasurer Omar Cruz said the market saw the Cabinet resignation as a positive development, indicating that the political crisis would not be prolonged and increasing the likelihood of a quick resolution.
"The market reads that as a development that has the potential to precipitate the quick resolution of this situation," Cruz said. "Investors, of course, want a return to normalcy as soon as possible. So it is no wonder that they took that positively."
According to Cruz, the feedback from foreign investor was more or less the same. "I told them I was staying on as treasurer and our market will not be disrupted in any way, which calmed them somewhat."
In Hong Kong, JPMorgan announced that it is cutting its recommendation on the sovereign debt of the Philippines to "underweight" from "tactical overweight", citing an uncertain political and fiscal situation in Asia’s biggest dollar bond issuer, next only to Japan.
"The prospect of prolonged political uncertainty combined with critical threats to much needed fiscal improvements should prove too much for markets to stomach and we move to underweight," said David Fernandez, emerging Asia research head.
Financial markets, already jittery over the political crisis, became even more wary after the Supreme Court ordered the suspension of the implementation of the new expanded value added tax (EVAT) .
The resignation of eight top cabinet officials added an even bigger blow but the market reaction had been mixed even in the local equities market.
Share prices rose 1.5677 percent Friday, with the main index gaining 28.96 points to 1,876.28.
Except for the oil index, which was unchanged, all other sectoral indicators posted gains. Gainers swamped losers, 43 to 24, while 40 issues were unchanged. Value turnover was pegged at P1.431 billion.