THE PESO weakened anew against the greenback on Thursday as players anticipated a rate cut from the central bank and amid risk-off sentiment due to the sell-off in the stock market.
The local unit closed at P51.10 per dollar yesterday, depreciating by five centavos from its P51.05 finish on Wednesday, according to the data from the Bankers Association of the Philippines.
The peso opened the session weaker at P51.30 against the dollar. It dropped to as low as P51.38, while its intraday best was at P51.05 versus the greenback.
Dollars traded dropped to $597.08 million from the $712.25 million seen on Wednesday.
A trader attributed the peso’s drop to the market factoring in a rate cut from the central bank, whose decision was due later on Thursday.
“The peso depreciated from market expectations that the BSP (Bangko Sentral ng Pilipinas) might deliver a more aggressive 50-bp (basis point) policy rate cut later [on Thursday],” the trader said in an e-mail.
The BSP Monetary Board’s announcement of a 50-bp rate cut came after financial markets closed on Thursday. This brought the yield on the BSP’s reverse repurchase facility to 3.25%, while overnight lending and deposit rates are now at 3.75% and 2.75%, respectively.
A BusinessWorld poll last week saw 12 out of thirteen economists expecting at least a 25-bp cut, with some economists saying a 50-bp reduction could also be on the table amid heightened economic risks due to the spread of the coronavirus disease 2019 (COVID-19).
COVID-19 cases in the Philippines reached 202 as of Wednesday night.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso’s close was among its weakest performances in more than two months.
“The peso exchange closed slightly weaker after the latest sell-off in the global stock markets that favored the dollar as a safe haven,” Mr. Ricafort said in a text message.
After a two-day trading halt, the Philippine Stock Exchange index saw a heavy sell-off on Thursday and lost 711.95 points, dropping by 13.34% to 4,623.42.
Today, the trader expects the peso to move within the P51.05 to P51.25 levels, while Mr. Ricafort gave a forecast range of P50.95 to P51.25. — L.W.T. Noble