THE PESO declined on Monday ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting and amid weak data from large European economies.
The local unit ended at P52.185 versus the greenback on Monday, dropping 22 centavos from its P51.96-to-a-dollar close on Friday.
The peso opened slightly weaker at P52.05 versus the dollar. It logged a low of P52.225, while its intraday high was at P51.95 against the greenback.
Dollars traded on Monday climbed to $1.258 billion from the $1.144 billion seen on Friday.
Traders noted that the peso was relatively strong throughout the day’s trading. However, weak euro zone data pulled the peso down against the dollar.
“There were some reports of PMI (purchasing managers’ index) from Europe and it came out weak. This gave support to the dollar and weakened the euro as well,” the first trader said.
This was echoed by another trader. “The peso traded in a tight range for most part of the day but the news of the German PMI data 30 minutes before the close was the cause of a risk-off tone sentiment,” the second trader said.
The second trader added that the upcoming policy meeting of the BSP’s Monetary Board (MB) also affected the local currency.
“It could also be the market pricing for the possible MB 25-bps (basis points) policy rate cuts and the possible adjustment of RRR (reserve requirement ratio) cut.”
Bond yields across the euro area tumbled on Monday after weaker-than-expected business activity data from the bloc’s biggest economies that deepened investors’ recession fears.
German private sector activity shrank for the first time in 6-1/2 years in September as a manufacturing recession deepened unexpectedly and growth in the service sector lost momentum, a survey showed on Monday.
Markit’s flash composite PMI, which tracks the manufacturing and services sectors that together account for more than two-thirds of Germany’s economy, fell to 49.1 from 51.7 in the previous month.
French business activity also slowed unexpectedly and Markit’s euro zone composite flash PMI sank to 50.4 in September from 51.9 in August.
Meanwhile, seven of eight analysts asked in a BusinessWorld poll last week said the BSP will likely cut rates by another 55 bps at its meeting this Thursday, which will follow reductions of the same magnitude announced following its May 9 and Aug. 8 reviews that slashed rates for overnight reverse repurchase, overnight deposit and overnight lending to 4.25%, 3.75% and 4.75%, respectively.
BSP Governor Benjamin E. Diokno has said a 25-bp cut would be on the table at the MB’s policy review this month and another 100-bp reduction in big banks’ RRR “is always on the table” at any of the BSP’s weekly meetings towards yearend after the phased 200-bp cut that ended in late-July.
The first trader said with the market recently being “headline-driven,” the peso may range around P51.90-P52.20 versus the dollar today should there be “good news,” while negative developments may cause the local unit to fall between P52.10 and P52.40.
Meanwhile, the second trader expects the peso to move at around P52.15-P52.45 against the greenback. — Luz Wendy T. Noble with Reuters
