THE peso weakened Friday on continuing concerns about the coronavirus disease 2019 (COVID-19) outbreak’s impact on the gloabl and following the central bank’s rate cut.
The peso closed at P50.90 against the dollar, after finishing at P50.80 Thursday, according to data from the Bankers Association of the Philippines.
The peso opened at P50.78, with an intraday low of PP50.93 and a high of P50.72.
Dollars tradding volume was $491.6 million, up from $352.1 million Thursday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso weakened in the wake of another rate cut by the Bangko Sentral ng Pilipinas.
“The peso closed at P50.90 a day after the surprise (50 basis—point) cut in policy rates that reduce the interest rate income of peso-denominated fixed-income investments,” he said in a text message.
On Thursday, BSP Governor Benjamin E. Diokno announced that the Monetary Board slashed policy rates further by 50 basis points to encourage lending to support the economy during the COVID-19 crisis.
This brought down rates for overnight reverse repurchase, lending, and deposit to 2.75%, 3.25%, and 2.25%, respectively.
The cut came less than a month after the 50-bp reduction in a scheduled Monetary Board meeting on March 19, which took effect on March 20.
Mr. Ricafort added that latest economic data releases from China and the US also weighed on the peso.
“The sharp decline in China’s GDP (gross domestic product) in Q1 2020 also partly caused some increase in global risk aversion,” he added.
According to China’s Bureau of Statistics, the Chinese economy economy contracted 6.8% year-on-year in the first three months, the first retreat since at least 1992 when quarterly GDP records began.
A trader who asked not to be identified said the rate cut as well as new economic data from the US affected the peso’s performance.
“The peso weakened following the announcement of an off-schedule 50-point basis BSP point policy rate cut yesterday and as new US layoff numbers for this week remain elevated,” he said in an email.
Reuters reported that 22 million Americans applied for unemployment benefits over the past month, representing about 13.5% of the work force. — Luz Wendy T. Noble