THE PESO weakened against the dollar on Tuesday as the government kept Metro Manila and nearby provinces under lockdown and due to data showing that manufacturing activity improved in May, which may mean higher imports.
The local unit closed at P47.76 versus the dollar on Tuesday, weakening by 6.5 centavos from Monday’s finish of P47.695, data from the Bankers Association of the Philippines’ website showed.
The peso opened Tuesday’s session stronger at P47.65 against the dollar. It climbed to as high as P47.61, but succumbed to the greenback’s strength as it closed nearer to its intraday low of P47.77.
Dollars traded went up $1.124 billion on Tuesday from the $878.5 million seen on Monday.
Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said the peso dropped versus the dollar following the release of data showing improved factory activity in the country, “which could lead to some pick up in imports.”
Manufacturing activity in the country posted a softer contraction in May as new orders and production improved amid eased quarantine conditions, a survey by IHS Markit showed.
The Philippine Manufacturing Purchasing Managers’ Index (PMI) picked up to 49.9 in May from 49 in April, a tad below the 50 neutral mark that separates expansion from contraction, IHS Markit said in a press release on Tuesday.
This signaled a “softer downturn across the Philippines manufacturing sector, as operating conditions inched towards to stabilization,” it said.
Mr. Ricafort added that the government’s decision to keep Metro Manila and its nearby provinces under general community quarantine with “heightened restrictions” this month also affected the local currency.
Meanwhile, a trader said the peso dropped versus the dollar on the back of progress in the US government’s infrastructure spending plan.
Negotiations with US President Joe Biden over a potentially massive infrastructure investment package are inching forward even though disagreements remain over the size and scope of such legislation, Republican Senator Shelley Moore Capito said on Sunday, according to a Reuters report.
The Republican senators have proposed $928 billion to improve roads, bridges and other traditional infrastructure projects. Much of the funding would come from money already enacted into law for other purposes that they argue is unused.
The Biden administration’s latest offer in negotiations is for $1.7 trillion and would include federal spending on projects that go beyond traditional infrastructure, such as home care for the elderly.
For Wednesday, the trader expects the peso to move between P47.65 and P47.85 versus the dollar, while RCBC’s Mr. Ricafort gave a forecast range of P47.70 to P47.85. — with Reuters