THE PESO slipped versus the dollar on Friday to its weakest in a week, as investors await the turnout of key economic data in the United States and further hints on its ongoing trade war with China.
The local unit closed at P53.135 against the greenback, 4.5 centavos down from Thursday’s P53.09 finish. This is the weakest showing of the peso since the P53.15-per-dollar close on Aug. 3.
The peso opened the session at P53.13, already weaker than the previous day’s rate. It touched P53.09 as its best showing during the day but also hit as high as P53.20 before trading ended.
This also marked the fourth straight day of peso depreciation, coming from Monday’s P52.85 close.
Sought for comment, two traders attributed the peso’s slip to gains favoring the dollar, even if the aggressive rate hike announced by the Bangko Sentral ng Pilipinas (BSP) should have provided support to the local currency.
“The peso depreciated [on Friday] as investors positioned ahead of firm US inflation readings tonight, with the 50-basis point rate hike from the BSP having already factored in by the local market during the week,” one trader said.
The central bank raised benchmark interest rates by 50 basis points (bp) on Thursday afternoon, signalling a more aggressive move to rein in price pressures given threats that inflation could remain elevated until 2019.
This is the BSP’s strongest policy response in a decade, but has been expected by market players following the higher-than-expected 5.7% inflation rate in July. BSP Governor Nestor A. Espenilla, Jr. said they see inflation “on the high side,” with policy makers now seeing signs that prices could exceed the 2-4% target next year.
On the other hand, the US government will report July inflation data Friday night, which will help determine the timing and pace of future rate hikes from the Federal Reserve.
Another trader noted that the dollar “grew stronger overnight,” capping any big moves for the peso. She said that looming trade tensions between Washington and Beijing continue to affect market sentiment, to the benefit of the greenback.
Dollars traded on Friday reached $664.3 million, slightly lower than the $682.1 million which exchanged hands the previous day.
Mr. Espenilla has said he hopes the 50bp move may lift the peso, although such adjustments are not necessarily the target of policy tweaks. — Melissa Luz T. Lopez