Peso plunges to six-week low vs dollar

THE PESO plunged to a six-week low against the dollar following statements from Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno about slashing banks’ reserve requirement ratio (RRR) quarterly.
The peso closed the session at P52.70 versus the greenback on Tuesday, slumping by 50 centavos from the P52.20 finish on Monday.
This was the peso’s worst showing in more than six weeks or since it closed at P52.86 per dollar last Jan. 24.
The peso opened Tuesday’s session stronger at P52.13 against the greenback, jumping to as high as P52.11 intraday. However, it closed the session at its worst showing.
Trading volume surged to $1.744 billion yesterday from the $833.54 million that switched hands the previous day.
A foreign exchange trader said the peso strengthened initially as the market “tried to short the dollar against the peso.”
“But as we saw the BSP Governor Diokno gave remarks on reserve ratio cuts, we saw the market up to P52.40 in the morning session,” the trader said in a phone interview yesterday.
In an interview with ABS-CBN News Channel, the new central bank chief hinted at the possible easing of reserve standards for banks once every three months.
“I think there’s room for monetary easing. It could be one percentage point every quarter for the next four quarters. We’ll look at the data and see,” Mr. Diokno said.
He added that any future adjustments to the reserve requirement ratio are meant to bring down the ultra-high regime and not so much about providing stimulus for the state infrastructure push.
“During the afternoon session, as we saw the offshore prices of the dollar-peso rising at a very high rate, we saw the market to continue to rise until P52.70,” the trader added.
The BSP slashed the RRR in March and May last year, bringing the mandatory reserves for big banks to 18% of their total deposits.
“We’ll look at the data and see, because every time we reduce our reserve requirement by 1%, that translates to P90-100 billion in the economy,” Mr. Diokno added.
Meanwhile, another trader attributed the peso’s slump to the release of the country’s trade data.
“The peso weakened after the Philippine January 2019 trade balance report reverted to a wider deficit after the narrowing in December 2018,” the second trader said in an e-mail.
The country’s trade deficit widened in January to $3.76 billion from the $3.75 billion recorded the previous month, as imports grew by 5.8% and exports declined by 1.7%.
For today, the first trader said the peso may move between P52.50 and P52.80 versus the dollar, while the other trader gave a P52.55-P52.85 range. — K.A.N. Vidal