THE peso strengthened on Friday, returning to its P51-a-dollar level on the back of the expected 25-basis-point policy rate cut by the central bank on Thursday despite weaker-than-expected economic growth in the second quarter.
The peso gained 16 centavos to close at P51.88 against the greenback.
“The local currency appreciated significantly after the central bank delivered a 25-basis point policy rate cut as expected,” a trader said in an email.
The interest rate cut came despite some bets for a bigger slash after weaker gross domestic product growth last quarter and looser policy rate adjustments by various central banks overseas, the trader said.
The Bangko Sentral ng Pilipinas’ policy-setting Monetary Board cut the interest rate on its overnight reverse repurchase facility by 25 bps to 4.25% as inflation pressures continued to ease. The rates on the overnight deposit and lending facilities were cut to 3.75% and 4.75% respectively.
The peso opened at P51.96 a dollar, weakened to as much as P51.97 and strengthened to as much as P51.84.
The economy grew by 5.5% in the three months to June, the slowest in four years. This was also below the government’s 6% to 7% growth target for 2019 and the 5.9% median estimate in a BusinessWorld poll of 15 economists last week.
Volume droppedtot $914.71 billion from $1.452 billion a day earlier.
The peso is likely to range from P51.85 to P52.25 a dollar as the trade was between the US and China escalates, another trader said.
US President Donald J. Trump earlier said he wanted to impose an additional 10% tariff on $300 billion of Chinese goods starting Sept. 1.
In retaliation, China’s central bank devalued its currency to 7 yuan per dollar. Trade tensions went to another level when the US accused China of manipulatin its currency. — Beatrice M. Laforga