Peso weakens to fresh 11-year trough

THE PESO slid to a fresh 11-year low yesterday as market players favored holding on to the dollar as a safe-haven currency amid bleak economic data and simmering tensions in Europe.

The local unit dropped to P51.53 versus the greenback on Thursday, 12.5 centavos weaker than the P51.405 finish the previous day. This is also the peso’s weakest showing since closing at P51.60-per-dollar on Aug. 24, 2006.

The peso opened weaker at P51.43, but briefly touched P51.38 as its best showing for the day. However, it hit P51.53 as its intraday low, which was eventually the closing rate.

Traders interviewed yesterday attributed the wide move largely to a firmer dollar, reflecting a riskoff tone taken by market players at a time of uncertainty among global financial markets.

“Basically, it’s a strong dollar compared to the other currencies across the board,” the first trader said by phone, noting that investors particularly reacted to weak retail sales data in the United Kingdom (UK).

UK retail sales fell by 0.8% in September, Reuters said in a report, which is seen to affect the chances of a long- overdue rate hike from the Bank of England.

On the other hand, US factory output expanded by 0.3% in September, reversing a 0.7% drop in August as the impact of the twin hurricanes waned.

Another trader described yesterday’s exchange rate as “surprising,” as the dollar was initially trading softer that day.

“The markets are choppy and are on a risk- off mode. There’s no conviction at this point,” the second trader said, while noting that investors may have went for the dollar as safe-haven amid rising tensions in Spain.

The Spanish government has announced that it will be tapping emergency measures to stop Catalonia’s independence, which adds to simmering tensions in Europe.

Despite the depreciation of the peso, both traders said the Bangko Sentral ng Pilipinas likely remained on the sidelines during trading as the aggregate volume stood average. Some $565.7 million exchanged hands on Thursday, slightly higher than the $497.6 million which were traded the previous day.

For today, the first trader sees the peso trading within P51.45- P51.70, with market players awaiting key economic data in the US which will be released over the weekend.

The second trader expects the currency to move within the P51.20-P51.60 range.

Other Asian currencies also softened against the dollar on Thursday as the greenback firmed overnight, while the yuan retreated after data showed China’s economic growth eased in the third quarter.

The dollar hit its highest in about two weeks versus the yen on Thursday.