Peso weakest against dollar in 17 months

The peso sank to its weakest in over 17 months as regional markets were pummeled after the US Federal Reserve heralded easing of stimulus and China reported poor manufacturing data.

The local currency ended trading at its sessions low of 43.8:$1, the weakest since January 16, 2012's 43.88:$1 close.

It was also the lowest the peso traded in since it touched 43.95:$1 in May 25, 2012.

“It pulled back primarily on the Fed statement,” a trader at a local bank said.

On Wednesday (Thursday in Manila), Fed chairman Ben Bernanke said the US may trim its bond-buying program, dubbed quantitative easing or QE, later this year with an eye to ending it mid-2014 as the world's biggest economy improves.

Speculations of the Fed tapering off stimulus have eroded the appeal of risky assets, like the peso, resulting in investors turning to US instruments.

A second trader said investors also dumped risk currencies following weak manufacturing data in China amid jitters caused by Bernanke's statement.

“The peso joined the regional bloodbath in currencies and regional sell-off in equity markets not only because of Fed announcements but also weak data from China,” he added.

The flash HSBC China Purchasing Manager's Index (PMI) fell to a nine-month low of 48.3 in June, worse than the final reading of 49.2 a month earlier when the index contracted the first time in seven months.

The flash PMI measures the health of manufacturing based on new orders, inventory levels, production, supplier deliveries and the employment environment.

The first trader, meanwhile, said the peso will remain weak until “hysteria over the QE is still in the air.”

“Fundamentally, we're still solid – balance of payments (BOP) is still in surplus on structural dollar inflows due to remittances,” he added.

This echoed earlier pronouncements by the Bangko Sentral ng Pilipinas and National Economic and Development Authority that the country's BOP or the record of transactions worldwide remains healthy.  — KBK, GMA News