THE PESO weakened further, returning to the P52-per-dollar level, as markets continued to react to lingering US-China trade tensions.

The local unit gave up 36.5 centavos, closing at P52.32 against the dollar on Wednesday from the P51.955 finish on Tuesday.

This was the worst performance of the local currency in 10 weeks or since the P52.35-per-dollar finish last May 29.

The peso started the trading day at P52.05 versus the greenback. Its weakest point during the day was at P52.36, while its strongest showing was at P52 per dollar.

Volume traded on Wednesday was higher at $1.724 billion from $1.320 billion on Tuesday.

“The peso weakened significantly [on Wednesday] after the known dovish Fed James Bullard said that the US Federal Reserve should not rush to cut policy rates, despite seeing more rate cuts for the year,” a trader said via e-mail.

Reuters reported that St. Louis Federal Reserve President James Bullard said the Fed does not need to “pile on” interest rate cut as US economy continues to grow and is still adjusting to the looser policy settings implemented this year.

Mr. Bullard also told the White House to not expect additional rate cuts every time trade policy threats send financial markets into tailspin.

“I don’t think it is realistic for the Fed to respond to each threat and counter threat in a tit-for-tat trade war,” Mr. Bullard said.

Meanwhile, another trader interviewed by phone said: “Positions are being taken out as the market continues to react to the developments that have happened since last week,” referring to the escalating trade tensions between the United States and China.

US President Donald J. Trump last week said he wants to impose an additional 10% tariff on $300-billion worth of Chinese goods effective Sept. 1.

In retaliation, China’s central bank, the People’s Bank of China, devalued its currency to 7 yuan against the dollar. Trade tensions went to another level when the US called China a “currency manipulator.”

For today, traders said the peso may weaken further ahead of the local central bank’s policy meeting.

“The local currency might continue to weaken as participants might position ahead of a possible BSP (Bangko Sentral ng Pilipinas) policy rate cut, following the strong rate cuts from its Asian peers such as the Bank of Thailand and the Reserve Bank of India,” the first trader said.

On Wednesday, Bank of Thailand eased its key policy rate by 25 basis points (bp) to 1.5%, while the Reserve Bank of India made a 35-bp cut to its policy rate to 5.4%.

Meanwhile, last Monday, BSP Governor Benjamin E. Diokno said he expects to cut rates by some 50 bps this year.

The first trader expects peso to move between P52.20 and P52.50 versus the dollar, while the second one gave a forecast range of P52-P52.50. — Mark T. Amoguis

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