THE PESO dropped against the greenback on Tuesday amid softer manufacturing data in key markets due to the coronavirus disease 2019 (COVID-19) outbreak and amid hints of possible rate cuts to cushion the impact of the outbreak on the economy.
The local unit ended trading at P50.69 per dollar on Tuesday, depreciating by six centavos from its close of P50.63 on Monday, according to data from the website of the Bankers Association of the Philippines.
The peso opened at P50.65 against the dollar. Its weakest showing for the session was at P50.78, while its intraday best was at P50.55 versus the greenback.
Dollars traded dropped to $1.239 billion from $1.468 billion on Monday.
A trader said the local unit weakened as markets priced in lower-than-expected data in key markets abroad.
“The peso weakened as safe-haven demand for the greenback ensued following the release of softer-than-expected US and Euro zone manufacturing reports overnight,” the trader said in an e-mail.
Reuters reported that the US factory manufacturing activity eased in February as orders contracted, reflected worries on supply chain disruptions caused by the COVID-19.
The Institute for Supply Management (ISM) said its index of national factory activity slipped to a reading of 50.1 from 50.9 in January. The pace was lower than the 50.5 forecast yielded from a Reuters poll.
A reading above 50 indicates expansion in the manufacturing sector, which accounts for 11% of the US economy.
Meanwhile, the downturn in the Euro zone manufacturing eased despite the outbreak and how it could hit supply chains.
IHS Markit’s Manufacturing Purchasing Managers’ Index (PMI) inched up to 49.2 in February from January’s 47.9, pipping a preliminary estimate of 49.1 and chalking up its highest reading in a year.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso’s performance came after signals of possible easing from central banks around the world to guard against economic risks that could stem from the COVID-19 outbreak.
“The peso closed slightly weaker amid possible coordinated move by central banks to counter adverse effects of the coronavirus on the global financial markets…and after the BSP recently signalled preference for fiscal policy measures than monetary policy easing,” Mr. Ricafort said.
On Monday, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said another rate cut is still on the table and they could push for more rate cuts depending on their updated assessment of the outbreak which they will consider at the next policy-setting meeting on Mar. 19.
The rates on the BSP’s reverse repurchase, overnight lending and deposit facilities now stand at 3.75%, 4.25%, and 3.25%, respectively.
For today, the trader sees the peso trading at the P50.65-P50.85 levels, while Mr. Ricafort gave a forecast range of P50.55 to 50.80. — L.W.T. Noble with Reuters