THE PESO slipped against the dollar yesterday as the Philippines posted its biggest monthly trade deficit on record.
The local unit closed at P50.51 against the dollar on Tuesday, 15 centavos stronger than the P50.36 finish a session ago.
The peso opened slightly stronger at P50.33, also serving as yesterday’s best showing. Its intraday low, meanwhile, stood at P50.52.
Dollars traded on Tuesday surged to $665.6 million, up from yesterday’s $509 million.
Traders said the peso fell back to the P50.50 level after the Philippine Statistics Authority data released on Tuesday showed the trade deficit, the gap between Philippine imports and exports, widened to $21.95 billion from the $21.75-billion deficit booked in a comparable year-ago period.
“The peso weakened against the dollar because of the negative perception regarding the trade deficit,” Ruben Carlo O. Asuncion, chief economist of Union Bank of the Philippines, said in a phone interview.
However, Mr. Asuncion noted the widening trade gap is “not something to be worried about.”
“It’s actually a good sign. I would say it’s quite normal for a growing economy like the Philippines because goods, especially capital goods, have come pouring in to support economic activity,” Mr. Asuncion said, adding Philippine inflation is still intact and debt-to-gross domestic product ratio is one of the lowest.
However, Mr. Asuncion noted that while it is not quite a concern, the trade deficit is something to monitor.
Meanwhile, another trader noted investors have “covered their positions” ahead of the outcome from the US Federal Reserve’s policy meeting this week.“For today, the dollar rallied following the widened Philippine trade deficit as market players covered their position ahead of the FOMC (Federal Open Market Committee) starting (Wednesday),” a trader said.
During the two-day policy meeting that will end on Wednesday, the Fed is widely expected to hike interest rates.For today, a trader said the peso would move between P50.40 and P50.60, while Mr. Asuncion gave a wider range of P50.40 to P50.90, noting that the Fed rate hike will push further the peso downwards.
“However, the anticipated decision of BSP (Bangko Sentral ng Pilipinas) to keep their monetary policy rates steady might counter the drag the Fed rate will bring,” Mr. Asuncion added. — Karl Angelo N. Vidal