Peso slumps to 1-month low on BSP cut hints
THE PESO slumped to an over one-month low against the dollar on Tuesday after Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. said another rate cut is possible as early as next month.
The local unit closed at P57.31 per dollar, weakening by 11 centavos from its P57.20 finish on Monday, Bankers Association of the Philippines data showed.
This was the peso’s weakest close in more than a month or since its P57.58 finish on June 23.
The peso opened Tuesday’s session weaker at P57.25 against the dollar. Its intraday best was at P57.20, while its worst showing was at P57.38 against the greenback.
Dollars exchanged increased to $1.73 billion on Tuesday from $1.699 billion on Monday.
The peso declined following dovish signals from the BSP chief, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The peso weakened after BSP Governor Remolona reiterated the possibility of an August rate cut from the local central bank,” a trader likewise said in an e-mail.
Mr. Remolona said on Wednesday that a rate cut is “on the table” at the Monetary Board’s Aug. 28 review. If realized, this would mark the BSP’s third straight easing move since April.
The BSP has so far reduced borrowing costs by a total of 125 basis points since it began its easing cycle in August last year.
Mr. Remolona added that he is keeping his outlook for two more rate cuts this year. After August, the Monetary Board has two remaining meetings scheduled in October and December.
The dollar was also broadly stronger against major currencies on Tuesday, Mr. Ricafort added.
The euro struggled to recoup its steep losses on Tuesday as investors sobered up to the fact that terms of the trade deal between the US and the European Union favored the former and hardly lifted the economic outlook of the bloc, Reuters reported.
The euro slid 1.3% in the previous session, its sharpest one-day percentage fall in over two months, on worries about growth and as euro-area government bond yields fell.
The common currency failed to recoup its losses and last traded 0.02% lower at $1.1584.
The slide in the euro in turn boosted the dollar, which jumped 1% against a basket of currencies overnight.
The dollar held on to gains on Tuesday and knocked sterling to a two-month low of $1.3338. The yen edged 0.2% higher to 148.22 per dollar.
The dollar index steadied at 98.66.
US President Donald J. Trump said on Monday most trading partners that do not negotiate separate trade deals would soon face tariffs of 15% to 20% on their exports to the United States, well above the broad 10% tariff he set in April.
For Wednesday, the trader and Mr. Ricafort see the peso moving between P57.20 and P57.45 per dollar. — Aaron Michael C. Sy with Reuters
