Peso strengthens as dollar hits one-month low amid slowdown fears
THE PESO rose on Tuesday as the dollar hit a one-month low due to concerns over the global economy.
The local currency closed at P56.76 versus the dollar on Tuesday, strengthening by eight centavos from Monday’s P56.84 finish, data from the Bankers Association of the Philippines’ website showed.
The local unit opened Tuesday’s session stronger at P56.78 per dollar. Its intraday best was at P56.705, while its weakest showing was at P56.79 against the greenback.
Dollars traded went up to $1.058 billion on Tuesday from the $950.5 million on Monday.
“The peso strengthened amid broadening concerns of a slowdown in the global economy,” a trader said in an e-mail.
The dollar fell to a one-month low on Tuesday against its major peers after US Treasury yields dropped, before regaining some ground as the euro dipped on the back of weak economic data, Reuters reported.
The dollar index, which tracks the US unit against a basket of six currencies, was last up 0.04% at 105.63. It fell to 105.35 earlier in the session, the lowest since Sept. 22.
Survey data on Tuesday showed that euro zone business activity took a surprise turn for the worse this month as demand fell in a broad-based downturn across the region, suggesting the bloc may slip into recession.
German data were particularly weak, showing that activity in the services sector contracted while the ongoing slump in manufacturing continued.
Hawkish signals from the Bangko Sentral ng Pilipinas (BSP) caused the peso to climb, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.
The central bank may hike benchmark rates as early as this week to help stem growing price pressures, BSP Governor Eli M. Remolona, Jr. said on Tuesday.
“If the data say inflation will go up very significantly and there’s a risk of affecting inflationary expectations, then we may go for an off-cycle hike as early as this Thursday. Pwede ring next week (It could also happen next week),” Mr. Remolona said.
The Monetary Board raised borrowing costs by 425 basis points from May 2022 to March 2023 before holding its policy rate steady at a near 16-year high of 6.25% in its last four meetings.
The BSP is scheduled to hold its next policy meeting on Nov. 16, barring an off-cycle move.
For Wednesday, the peso may rise further on a “likely downbeat US manufacturing report overnight,” the trader said.
Mr. Ricafort and the trader see the peso moving between P58.65 and P58.85 per dollar on Wednesday. — MJBP with Reuters
