Market volatility, dollar rally seen to persist due to global risks, Fed tightening

Market volatility is likely to continue until the end of the year due to challenging global macro conditions, Manulife Investment Management Head of Macro Strategy Sue Trinh said on Tuesday.

Stagflation fears, the aggressive tightening of the US Federal Reserve, and the bear market sentiments are among the concerns that resulted in difficult trading conditions, Trinh told ANC.

"For the first time in over a decade, the market is grappling with a very challenging global macro context of stagflation which is historically very difficult for risk assets and not to mention the aggressive tightening and financial condition which is being amplified by central banks," she said.

"We do continue to anticipate choppy trading conditions with the market caught in a tug of war between bear sentiments, ongoing concern on the Federal Reserve tightening, as well as the longer term economic ramifications and downward earnings revision... I wouldn’t be surprised to see very large volatility in very wide ranges," she added.

In terms of foreign exchange, the dollar remain on the upside against Asian currencies due to the growth in interest rate differential and tighter global liquidity, among others, Trinh said. 

The US Federal Reserve had also signaled further interest rate hikes in the near term and the intent to keep the US borrowing rate elevated until 2024. 

The Philippine Stock Exchange Index (PSEi) on Tuesday morning declined by 249.29 points or 3.98 percent to 6,010.25 level, as of 10:50 a.m.

Meanwhile, the peso has dipped to as low as 58.96 to $1 in the intra day trading as of 10:30 a.m.

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