Peso drops to two-week low on weak global growth prospects

THE PESO slipped to two-week low versus the dollar on Friday, reeling from negative market sentiment following a dimmer global outlook from the European Central Bank (ECB).
The local unit ended the week at P52.25 against the greenback, 10 centavos weaker than Thursday’s P52.15 finish.
This is the peso’s weakest showing since Feb. 18 at P52.33.
The peso traded generally weaker as it opened at P52.30, even touching an intraday low of P52.385 to $1 during the session. It briefly touched P52.23 as its best showing for the day before settling at the closing rate.
Two traders attributed the peso’s move to market caution following the ECB’s dovish remarks.
“The peso weakened today on dollar safe-haven demand on anticipations of strong US labor data tonight and after the European Central Bank revised down its inflation and growth outlook for the Eurozone and initiated a new stimulus program for financial institutions to avert any anticipated future credit crunches,” one trader said when sought for comment.
Reuters reported that ECB President Mario Draghi said the European economy is in a “period of continued weakness and pervasive uncertainty,” offering cheap credit for banks rather than delivering on its planned rate hikes.
Another trader noted that this triggered a “risk-off” sentiment among investors, with the paler growth outlook for Europe boosting the dollar and creating what appears to be a modest “contagion” effect for other currencies.
Still, dollars traded on Friday rose to $1.233 billion, higher than the $1.079 billion which exchanged hands the previous day.
The second trader noted that these currency trades may be due to some flows for retail Treasury bond purchases, as well as interbank trading within the day.
The currency saw a big depreciation earlier this week as markets reacted to the appointment of Budget Secretary Benjamin E. Diokno as new governor of the Bangko Sentral ng Pilipinas, who is viewed to be dovish.
“He is more dovish, which means there’s a lower interest rate scenario that will lead to a weaker peso,” the trader added. — Melissa Luz T. Lopez