MANILA, Philippines - Bucking a fall in the equity market, the peso strengthened to its highest level in nearly five years as foreign investors, bullish on the local economy, made a last-minute purchase of local assets.
The peso closed at 40.70 to a dollar, firming up by 8.5 centavos from 40.785 the previous day. It also beat the previous near-five-year high posted just last week when the peso closed at 40.77.
This was the peso’s strongest performance since March 6, 2008 when it hit 40.56 to $1.
“This is still because of inflows to the stock market. Positive sentiment to the country is driving investors in the peso direction suggesting more inflows,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc., in a phone interview.
Total transactions reached $1.229 billion, up from Wednesday’s $773 million. A local bank trader said this is a proof that foreign inflows continued to swamp the local economy. For instance, there is still a “healthy dose” of stock market investments yesterday.
This was despite the benchmark Philippine Stock Exchange index (PSEi) falling 72.61 points or 1.19 percent to 6,018.570 after a six-day bull run.
“Foreign equity in the foreign exchange market is still comparable with those from the stock market. The high reached today (in the peso) is due to large buying in the afternoon trading,” the trader explained.
“Foreign inflows continued on coming. The correction in PSEi is due to profit taking from local investors,” he added.
Ravelas agreed, saying PSEi ending in the red for the first time this year was “more of a pause rather than a reversal” of inflows. “There is still the earnings season, so I think PSEi will recover,” he added.
At yesterday’s trading, the peso reached its highest point at 40.69, while settled at 40.79 at its lowest. Analysts said the peso could have been traded at a stronger 40.67 in the “global market,” but Ravelas said there is no way to confirm this.