Peso drops on slowdown fears

THE PESO declined against the dollar yesterday amid risk aversion as investors priced in a possible global economic slowdown.

The local unit ended Thursday’s session at P52.65 versus the greenback, 13.5 centavos weaker than the P52.515-per-dollar finish on Wednesday.

The peso opened the session at P52.55 against the US currency and slipped to a low of P52.72 intraday. Meanwhile, its best showing stood at P52.53 versus the dollar.

Trading volume climbed to $797.5 million from the $580.05 million that switched hands the previous day.

Foreign exchange traders interviewed yesterday attributed the peso’s decline to the slew of weaker-than-expected economic data worldwide, which fuelled concerns of a global economic slowdown.

“Data worldwide [on Wednesday] showed weaker-than-expected figures, so it may indicate a slower growth for the global economy,” a trader said in a phone interview.

“I think the market priced in more of a risk aversion sentiment overnight,” the trader added.

Reuters reported that China’s factory activity declined last month, with the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) sliding to 49.7 from the 50.2 recorded in November. This was the first time it declined in 19 months as local and offshore orders dwindled further.

Meanwhile, the December Eurozone PMI fell to its lowest level since February 2016, while the US PMI last month hit a 15-month low.

“Although the peso tried to trade near the close, it was aggressively lifted until P52.72 as other emerging market currencies weakened against the dollar as well,” the trader said.

For today, the trader expects the peso to correct, giving a forecast range between P52.50 and P52.70.

Meanwhile, the other trader gave a P52.55-P52.75 range, as the peso might strengthen on likely positive local inflation data for December to be released today. •