The peso dipped against the dollar, recording a new near 12-year low on Friday following the reserve requirement cut of the local central bank.
The local currency ended at P52.70 versus the greenback on Friday, 15 centavos weaker than the P52.55-per-dollar finish on Thursday.
Friday’s finish was the peso’s fresh low in nearly 12 years since July 19, 2006, when it closed at P52.745.
The peso opened the session slightly weaker at P52.58, while its worst showing stood at P52.705 against the US currency. Its intraday high, meanwhile, was at P52.50.
Dollars traded slipped to $719 million from the $899.95 million logged the previous trading.
A foreign exchange trader said the peso weakened following the move of the Bangko Sentral ng Pilipinas (BSP) to cut the banks’ reserve requirement.
“We broke past the resistance level agains because of the BSP cutting reserve requirements,” the trader said in a phone interview. “That’s bearish for the peso.”
In a statement on Thursday, the BSP’s Monetary Board announced that the reserve requirement ratio (RRR) imposed on universal and commercial banks will be trimmed by a percentage point to 18% effective June 1.
This follows a cut of the same magnitude announced on Feb. 15 and was effective March 2.
“If you cut the reserve requirement, you’re putting in more peso into the system. More supply of peso means a bearish peso,” the trader added.
An estimated P90 billion will be released from idle funds kept by banks with the BSP which they may soon deploy for greater lending and other uses.
Meanwhile, another trader said: “The peso closed weaker today amid rather optimistic outlook on the US-North Korean summit despite uncertainties over the last 24 hours.”
On early Friday, President Donald J. Trump called off its meeting with North Korean leader Kim Jong-un for next month in Singapore, citing the “open hostility” of Pyongyang, according to a Reuters report. — Karl Angelo N. Vidal