THE PESO continued to slump versus the greenback on Thursday to hit another trough due to a stronger dollar overall and on the back of foreign selling in the local bourse, which strengthened appetite for the greenback.
The local currency closed at P50.67 against the greenback, sliding seven centavos from its P50.60-per-dollar finish on Wednesday.
Yesterday’s finish was the peso’s weakest level in more than a decade or since it ended at P50.735 per dollar on Sept. 1, 2006.
The peso opened the session at its best showing for the day at P50.53 versus the foreign currency, while its intraday low was seen at P50.695-to-a-dollar.
Dollars traded amounted to $429.9 million yesterday, down from $507 million seen the previous day.
Shortly after the session opened, Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. told reporters in a text message that the central bank continues to monitor sharp swings from the peso’s movement versus the dollar.
“The latest peso movements broadly reflect prevailing market conditions and underlying economic fundamentals, in line with BSP exchange rate policy. BSP is nevertheless actively managing excessive volatility. This is business as usual,” he said.
As regulator to the Philippine financial system, the central bank sometimes intervenes in the daily foreign exchange market in order to temper any sharp peso swings and maintain its stability.
Mr. Espenilla also noted external factors primarily contributed to a stronger dollar, particular major central banks’ recent pronouncements. “A major driver is sentiment for a stronger USD as the Fed[eral Reserve] moves forward with steps to normalize from ultra-easy monetary policy as US economic conditions steadily improve. There is also growing policy convergence with Europe and even Japan,” he said.
Meanwhile, two traders attributed the local currency’s continued weakness against the greenback to a stronger dollar across the board.
“Despite a less bullish minutes from the Fed overnight, the dollar-peso continued to move up, so I guess that’s the direction it’s going. We’ll continue to track the movement of the US dollar in the region,” the trader said by phone on Thursday.
The trader said the peso was the weakest performer among its regional peers, opening the possibility of the exchange rate settling at the P51:$1 levels.
Asked if the P51 per dollar level could be seen within the month, the trader said it’s possible, noting: “there’s still a lot of factors to consider, depending on the BSP, because the BSP is also tempering the move of the peso.”
“It depends. If they will let go then we will easily see P51-to-a-dollar levels, but if not, then it may take a long time before that level could be reached but, yes, I think this month we can see that levels,” the trader noted.
“We also saw local equities quite on a foreign net selling so I think it played a part that’s why there’s demand for the dollar. Offshore prices also traded at a premium so there’s buying demand spilling in the offshore market,” a second trader noted.
Another trader said by e-mail on Thursday: “The peso depreciated today after minutes of the recent US monetary policy meeting suggested that the Fed might start reducing its balance sheet starting September.”
Reuters reported the Fed’s minutes during its June Federal Open Market Committee meeting failed to give a concrete view of their future plans of policy tightening, but with Fed Chair Janet L. Yellen indicating they are preparing the ground work for unwinding their balance sheets by yearend.
For today, the first trader sees the peso moving within P50.60 to P50.80 versus the dollar, while the other trader forecasts a P50.55-P50.75 range. The third trader said the exchange rate may settle within P50.45 to P50.75.
“Market may trade cautiously [today] as non-farm payrolls data will be coming out so depending on the results, that’s when we see if the peso will continue to weaken or strengthen against the dollar,” one trader noted. — Janine Marie D. Soliman
