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Peso continues to drop

peso continues to drop 816x445 - Peso continues to drop
peso dollar bills 040318 - Peso continues to drop

THE PESO weakened further against the dollar on Wednesday ahead of likely upbeat US economic data and following comments from the local central bank’s chief.

The local unit closed yesterday’s session at P51.175 versus the greenback, four centavos weaker than its P51.135-per-dollar finish on Tuesday.

The peso opened the session weaker at P51.225 against the dollar, slipping to as low as P51.295 intraday. Meanwhile, its best showing stood at P51.17 versus the US currency.

Dollars traded reached $1.167 billion, higher than the $754.11 million that switched hands the previous day.

“The peso weakened on expectations of upbeat US manufacturing and services PMI (Purchasing Managers’ Index) reports and after the BSP (Bangko Sentral ng Pilipinas) commented that inflation may go below 2% in the third quarter,” a trader said in an e-mail.

Inflation could settle below the official full-year target this quarter as food and oil prices ease, BSP Governor Benjamin E. Diokno told reporters on Tuesday, citing “base effects” due to multiyear-high rates last year.

“Third quarter na tayo, so baka below two pa nga ‘yan because of the base effects (We’re in the third quarter, so it might settle below two percent because of the base effects),” Mr. Diokno said at the sidelines of a forum, also citing a “significant” drop in oil prices as well as the cost of rice.

Another trader attributed the peso’s weakness to continued dollar strength at the start of the session.

“The dollar-peso continued to gap higher due to dollar strength at least at the start,” the second trader said in a phone interview. “I think it was due to the less aggressive rate cut from the (US Federal Reserve). The initial view was for a very aggressive rate cut, and then we’re getting some news that it may not be as aggressive. The short dollar positioning was reversing.”

The US Federal Reserve is expected to trim interest rates during its July 30-31 meeting. However, the odds for a 50-basis-point cut were trimmed after the Federal Reserve Bank of New York clarified that hawkish comments from its president John Williams were not meant to imply there would be an aggressive rate cut.

The second trader noted that the dollar reversed its gains in the afternoon session on profit-taking ahead of the policy meeting of the European Central Bank today.

For today, the first trader expects the peso to move between P51.10 and P51.40 versus the dollar, while the other gave a P51.05-P51.30 range. — Karl Angelo N. Vidal

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