Peso drops further vs dollar
THE PESO weakened against the dollar on Wednesday due to a wider trade deficit and as market players await for the central bank’s monetary policy decision.
The local unit closed at P53.07 on Wednesday, seven centavos weaker than its P53-per-dollar finish on Tuesday.
The peso opened the session stronger at P52.93 versus the dollar, which was also its best showing for the day. Meanwhile, it slid to an intraday low of P53.08 against the greenback.
Dollars traded climbed to $721.15 million from the $681.5 million that switched hands the previous day.
In an e-mail, a foreign exchange trader said the peso weakened “on account of expectation of softer trade data.”
The country’s trade deficit stood at $3.35 billion in June, narrower than the $3.7 billion deficit in May but more than double the $1.59-billion shortfall in the same period last year.
“Although the trade deficit tightened a bit month-on-month, it’s still grew wider year-on-year,” another trader said in a phone interview yesterday. “Although it is widely expected for the figure to come out like that, the peso is still on the defensive side on the back of weak exports and higher imports.”
The trader added that the market is still awaiting the monetary policy decision of the Bangko Sentral ng Pilipinas (BSP) at its meeting today. The monetary authority is widely expected to raise its benchmark rates anew this week, with some economists looking at a 50-basis-point (bp) increase to ease price pressures.
BSP Governor Nestor A. Espenilla, Jr. told reporters in a text message on Tuesday that the central bank will consider all the latest data updates in determining the “strength” of its followthrough response in its meting.
“The market is already expecting for a 50-bp hike. But what if the BSP only raised by 25-bp? How will the market react to it? We’ll have to wait for that and we’ll take the clue after the release,” the trader said.
The trader noted that market players will also watch out for the secondquarter gross domestic product (GDP) growth data due for release today, although the focus remains on the possible rate hike.
“Unless we see something that’s significantly higher or lower than expected, I don’t think we will see a big move following the GDP growth release.”
Meanwhile, the first trader said the peso weakened as demand for the dollar propelled following the fresh bond offerings by the US Treasury.
For Thursday, the first trader expects the peso to move between P52.90 and P53.10 versus the dollar, while the other gave a P52.95-P53.20 range. •