this story was taken from www.inq7money.net
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=06&dd=07&file=3
Posted: 2:39 AM | Jun. 07, 2006
Doris C. Dumlao
Inquirer
THE PESO stumbled anew Tuesday against the US dollar, spooked by increased probability of an interest rate hike by the US Federal Reserve this month, analysts said.
After moving farther away from the psychological barrier of 53 to the dollar late last week, the peso closed at 52.84 to the dollar Tuesday as against Monday's close of 52.725.
"The market is still driven by sentiment in the global markets regarding the possibility of global interest rate hikes," said Estelito Biacora, vice president at Bank of the Philippine Islands and director of financial markets association ACI Philippines.
"The market is looking at the strengthening of the US dollar versus major currencies … related to the possibility of another interest rate hike (by the Fed) on June 29," Biacora said.
Fed Chairman Ben Bernanke said in a speech in Washington Monday (Tuesday in the Philippines) that the US economy was slowing down but US inflation had risen to "unwelcome" levels that would require vigilance from the US central bank.
Analysts said Bernanke's speech increased the probability that the US Fed would raise its benchmark rate for the 17th straight time, to 5.25 percent, when it meets this month.
Other Asian currencies also tumbled Tuesday against the greenback after Bernanke's speech.
Higher interest rates in the US imply that assets denominated in currencies other than the dollar would become less attractive to investors.
Trading Tuesday on the Philippine spot foreign exchange market amounted to $367.5 million.
The government's fiscal and economic program for the year assumes an exchange rate range of 51-53 pesos to the dollar. With INQ7.net
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