peso bills
THE PESO weakened further as regional currencies declined on disappointing China trade data. — BW FILE PHOTO

THE PESO weakened against the dollar on Monday, tracking regional currencies as the rally in emerging markets (EM) eased following weak China trade data.

The local currency closed at P52.10 against the greenback on Monday, six centavos weaker than Friday’s P52.04-per-dollar finish.

The peso opened the session slightly weaker at P52.05 against the dollar. It rose to as high as P51.99 during the session, while its worst intraday showing was logged at P52.18.

Trading volume increased to $1.02 billion from the $983.99 million that switched hands from the previous session.

“Peso pulled back on Monday, tracking regional currencies with the EM rally fading after China reported relatively disappointing trade numbers,” ING Bank N.V.-Manila Branch senior economist Nicholas Antonio T. Mapa said in an e-mail.

“Regional currencies tracked the weakening bias for the yuan with the PBoC (People’s Bank of China) hinting that it would tolerate a weaker currency,” he added.

China’s exports unexpectedly returned to growth in May despite higher US tariffs, but imports fell the most in nearly three years in a further sign of weak domestic demand that could prompt Beijing to step up stimulus measures.

China’s May exports rose 1.1% from a year earlier, compared with market expectations for a modest decline, customs data showed.

Meanwhile, China’s May imports were much weaker than expected, falling 8.5%, the sharpest drop since July 2016. That left the country with a trade surplus of $41.65 billion for the month.

As trade pressures intensify, analysts believe China will loosen policy further in months ahead to shore up economic growth.

Meanwhile, Philstocks Financial Inc.’s Research Head Justino B. Calaycay, Jr. said in an email that expectations of “further monetary easing thru more cuts in banks’ reserve requirement ratios (RRR) lend a cycle of weakness to the currency.”

The Bangko Sentral ng Pilipinas slashed the RRR of lenders by a percentage point effective May 31 to 17% for universal and commercial banks, 7% for thrift banks and 4% for rural and cooperative banks.

The local currency may continue to weaken today on expectations of an upbeat US consumer price index report, a trader said, added that the peso-dollar exchange rate might hover within the P52-P52.20 range. — K.E.S. Franco with Reuters