Business World
Tuesday, September 22, 1998
Market sentiment on the peso did not improve over the weekend — the currency continued to slip yesterday.
Currency traders said the factors which weighed the peso down against the US dollar last Friday — corporate buying, limited dollar supply and market gloom over the closure of Philippine Airlines, Inc. were again present.
At the Philippine Dealing System (PDS), the country's electronic currencies exchange, the peso averaged at P44.148 against the US dollar, down from Friday's P43.891. Volume dropped to $95.6 million from $142 million.
Traders said corporations started buying dollars last week on expectation the peso will fall given the PAL debacle.
"(The peso's fall yesterday) wasn't a surprise, the chief trader of one foreign bank told Business World.
The trader said corporates continued buying dollars as the peso fell to the P44 levels. The strong demand negated an influx of dollars earlier after some banks reportedly sold dollars on the parallel market.
"The dollar selling (yesterday morning) was easily absorbed by the market .. people would rather take a long (dollar) position given the economic uncertainty," he said. "The banks sold, but there were more buyers than sellers," he added.
Another trader said PAL's closure added to speculative pressures on the currency. "There is regular demand, but the dollar supply is not yet in," he said. "Now this has been coupled with PAL's closure, so the market is jittery, and watching for any possible effect in the corporate sector."
He said the market jitters will turn into real concern if the airline does close down considering the banks' $2.1-billion exposure to the airline. "Investors will start asking if banks' NPL (non-performing loan) ratio will head up, and will be looking to get out.”
Currency traders see a rough week ahead as corporate dollar demand remains unabated.
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