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Peso weakens on US data bets

peso weakens on us data bets - Peso weakens on US data bets
Peso Currency BW - Peso weakens on US data bets
THE PESO declined on Tuesday on bets of positive US data and following a weak local trade report. — BW FILE PHOTO

THE PESO closed on a weaker note on Tuesday on the back of expectations of upbeat US producer inflation data.

The local unit depreciated to P51.98 against the greenback on Tuesday, shedding 11 centavos from its P51.865-per-dollar close on Monday.

The peso opened at P51.90 versus the dollar. Its weakest point was logged at P52.04, while its intraday best was at P51.84 against the greenback.

Dollars traded climbed to $1.495 billion on Tuesday against the $1.073 billion recorded on Monday.

“The peso weakened on market positioning ahead of likely upbeat US producer inflation reports [on Wednesday],” one trader said.

Meanwhile, Rizal Commercial Banking Corp. economist Michael L. Ricafort attributed the local currency’s decline to the wider Philippine trade deficit data in July.

“US dollar is also higher versus major global/Asian currencies after US Treasury bond yields went up recently to new two-week highs, thereby increasing US interest rate returns that increase the attractiveness/allure of the US currency,” Mr. Asuncion added.

US Treasury yields rose to three-week highs on Monday, in line with gains in the European bond market, as risk appetite improved amid easing US-China trade tensions and expectations of less-aggressive action from the European Central Bank (ECB) this week.

Yields on US debt, from two-year notes to 30-year bonds, all hit peaks after rising in two of the last three sessions, as investors grew less nervous about the US-China trade war.

Washington and Beijing have agreed to go back to the negotiating table.

Meanwhile, merchandise exports climbed 3.5% to $6.174 billion in July, faster than the 3.3% expansion in June and 2.3% growth in July 2018, preliminary data from the Philippine Statistics Authority showed.

On the other hand, the merchandise import bill declined by 4.2% to $9.567 billion in July from $9.983 billion in the same month in 2018.

These results brought the country’s trade deficit to $3.393 billion in July, which is 15.5% less than the $4.016 billion shortfall in July 2018.

For today, the trader said the peso may continue to depreciate.

“The local currency might continue to weaken further amid expectations of similar upbeat US consumer inflation report later this week. Exchange rates might move within the P51.90 and P52.10 range,” the trader said.

The trader expects the peso to move within P51.90-P52.10 against the dollar, while Mr. Ricafort said the local unit could trade at around P51.80-52.10.

Most other emerging Asian currencies held tight ranges ahead of the European Central Bank meeting later this week.

A sharp decline in Chinese factory gate prices also subdued appetite for riskier assets as investors remained nervous about the prospects of a global economic slowdown.

Factory-gate prices shrank at the sharpest pace in three years in August, data showed on Tuesday, falling deeper into deflationary territory and reinforcing the urgency for Beijing to step up economic stimulus as the trade war with the United States intensifies.

Currency market focus now turns to the ECB meeting, which is widely expected to introduce a package of stimulus measures and monetary easing on Thursday to boost an ailing regional economy.

The US Federal Reserve is also expected to cut interest rates next week.

Among regional currencies, the Malaysian ringgit, which resumed trading after a holiday, advanced 0.2% against the greenback and was the top gainer in the region.

The South Korean won erased earlier gains to trade 0.1% higher, while China’s yuan was marginally higher.

The Taiwan dollar edged higher, after data on Monday showed the trade-reliant economy’s exports rose unexpectedly in August on strong demand for smartphones. — L.W.T. Noble with Reuters

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