Peso slips against the dollar, hits P56:$1 intraday level as China cuts lending rate
THE PESO slipped against the dollar on Tuesday on renewed fears of a global slowdown after China’s central bank cut key lending rates to support the economy.
The local unit closed at P55.83 per dollar on Tuesday, inching down by half a centavo from its P55.825 finish on Monday, based on Bankers Association of the Philippines data.
The peso opened Tuesday’s session weaker at P55.95 versus the dollar. Its weakest showing was at P56.10, the first time the local unit hit the P56-a-dollar level since last month, while its intraday best was at P55.82 versus the green-back.
Dollars exchanged rose to $1.019 billion on Tuesday from $896.6 million on Monday.
“The peso weakened slightly from renewed global growth concerns after the surprise policy rate cut by the Chinese central bank,” a trader said in an e-mail.
The People’s Bank of China cut key lending rates in a surprise move on Monday to revive demand as the economy unexpectedly slowed in July.
The peso closed marginally weaker against the dollar, managing to recoup early losses, “amid some healthy upward correction in the US dollar versus major global currencies, as well as some recent market expectations of a possible mitigated local policy rate hike on Thursday… after softer 2Q 2022 GDP (gross domestic product) growth,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Bangko Sentral ng Pilipinas (BSP) is widely expected to raise its benchmark rates anew on Thursday, with most analysts forecasting a 50-basis-point (bp) increase as inflation remains elevated.
A BusinessWorld poll held last week showed 16 out of 18 analysts expect the Monetary Board to hike rates at its Aug. 18 meeting.
BSP Governor Felipe M. Medalla earlier said that the central bank’s policy-setting Monetary Board may hike rates by 50 bps at their meeting this week as inflation quickened to 6.4% in July, a near four-year high. This was also faster than the 6.1% in June and 3.7% a year ago.
For the first seven months, headline inflation averaged 4.7%, higher than the 4% seen in the same period in 2021 and the central bank’s 2-4% target for the year but lower than its 5% forecast.
The Monetary Board has raised rates by a total of 125 bps since May, including a 75-bp off-cycle hike last month.
For Wednesday, the trader said the peso may appreciate ahead of a likely weaker US retail sales report.
The trader expects the local unit to move within P55.75 to P55.95 per dollar on Wednesday, while Mr. Ricafort gave a forecast range of P55.70 to P55.90. — K.B. Ta-asan
