THE PESO slipped against the dollar on Thursday due to recession concerns following the release of data showing that manufacturing and services activity slowed down in Japan, Australia, and Europe.
The local currency closed at P56.76 versus the dollar on Thursday, down by three centavos from Wednesday’s P56.73 finish, data from the Bankers Association of the Philippines’ website showed.
The local unit opened Thursday’s session stronger at P56.58 per dollar. Its intraday best was at P56.57, while its worst showing was at P56.83 against the greenback.
Dollars traded went down to $1.13 billion on Thursday from the $1.56 billion on Wednesday.
“The peso depreciated further amid growing recession concerns after manufacturing and services PMI (purchasing managers’ index) data from Australia, Japan and major European countries showed sharp contractions in August,” a trader said in an e-mail.
Japan’s factory activity shrank for a third straight month in August amid higher oil prices and uncertainty over the global economic outlook, although the pace of decline slowed, a private sector survey showed on Wednesday, Reuters reported.
The au Jibun Bank flash Japan manufacturing PMI edged up to a seasonally adjusted 49.7 in August from 49.6 in July. The index remained below the 50 index point threshold, which separates contraction from expansion.
Meanwhile, Australia’s manufacturing sector continued to contract in August at a faster rate with a manufacturing PMI score of 49.4 from 49.6 in July, the latest survey from Judo Bank showed on Wednesday.
Likewise, Euro zone business activity declined far more than thought in August with the slide in Germany particularly fast, while some inflationary pressures returned, surveys showed.
Hamburg Commercial Bank’s flash Composite PMI for the bloc, compiled by S&P Global and seen as a good barometer of overall economic health, dropped to 47 in August from July’s 48.6, its lowest since November 2020.
The peso was also dragged lower by hawkish comments from the Philippine central bank chief, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.
BSP Governor Eli M. Remolona, Jr. on Tuesday said the central bank’s stance remains hawkish and rate cuts are far off as inflation is still elevated.
The Monetary Board kept benchmark interest rates steady for a third straight meeting last week, but said it is prepared to resume tightening if needed amid risks to inflation.
For Friday, the trader said the peso could remain weak due to caution ahead of US Federal Reserve Chair Jerome H. Powell’s speech at the Jackson Hole Economic Symposium.
The trader and Mr. Ricafort expect the peso to move between P56.65 and P56.85 per dollar on Friday. — AMCS with Reuters