Advertisement

Peso drops as BSP chief says another cut possible

Font Size

BW FILE PHOTO

THE PESO depreciated on Tuesday due to developments in the US-China trade negotiations, as well as comments from Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno that a rate cut is still possible within the year.

The local unit closed at P50.90 against the greenback on Tuesday, weakening by 14.5 centavos from the P50.755-to-a-dollar close on Monday, according to data from the Bankers Association of the Philippines.

The peso opened the session at P50.72 versus the dollar. Its weakest point for the day was at P50.90, while its intraday best was at P50.66 against the greenback.

Dollars traded inched up to $1.296 billion from the $1.203 billion on Monday.

Analysts attributed the peso’s decline to both local and global factors.

Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc., said the slight depreciation came after continued worries about the US-China trade deal.




“The continuing trade talks between the US and the PRC (People’s Republic of China as both sides agreed to stay in contact, are generally positive, but the conclusion of the Phase 1 deal still remains to be seen…which may be putting downward pressure on the peso even as the deal is seemingly moving forward,” Mr. Asuncion said in a text message.

Reuters reported that major trade negotiators from the world’s two biggest economies discussed through a phone call on Tuesday morning.

China’s Commerce Ministry said the two sides talked about “trying to hammer out” the preliminary phase one deal for their 16-month-old trade war.

Meanwhile, the trader said the peso’s weakness came after the BSP chief said a rate cut before the year ends is still on the table.

“The peso weakened after Gov. Diokno commented that a policy rate cut is still being considered for the December BSP policy meeting, defying market expectations of no adjustments for the rest of the year,” a trader said in an e-mail.

Mr. Diokno told reporters on Monday that another rate cut is possible if conditions warrant further easing.

“The BSP will always be data-dependent so we will evaluate…every time we have a policy meeting,” he told reporters on the sidelines of the Financial Education Stakeholders Expo at SMX Convention Center in Pasay City.

The BSP governor was commenting about an S&P Global Ratings’ report which said they expect one more rate cut in 2019.

The BSP has cut rates by a total of 75 basis points (bps) this year, partially dialing back the 175-bp in hikes it fired off last year in the face of multi-year high inflation.

At present, rates for the overnight reverse repurchase facility, as well as overnight deposit and lending, stand at four percent, 3.5% and 4.5%, respectively.

The Monetary Board will have its last policy meeting for the year on Dec. 12.

Asked on S&P’s rate cut expectation, Mr. Diokno said. “Pwede ’yun, pwede ’yun (It is possible).”

For today, Mr. Asuncion sees the peso playing around the P50.70-51 band, while the trader gave a forecast range of P50.80-51. — L.W.T. Noble with Reuters

Advertisement