THE PESO strengthened on Thursday despite weaker-than-expected gross domestic product (GDP) growth in the second quarter and ahead of the central bank’s policy decision.
The local currency gained 28 centavos as it closed at P52.04 against the greenback on Thursday, up from its P52.32-per-dollar close on Wednesday.
The peso opened the session slightly stronger at P52.28 against the greenback. Its lowest point for the day was at P52.395, while its strongest showing was at P52.12 per dollar.
Dollars traded dropped to $1.45 billion on Thursday from the $1.72 billion posted the previous day.
“A lot has happened on the home front. The 5.5% Q2 GDP growth release and the 25 bps (basis points) cut by the BSP (Bangko Sentral ng Pilipinas) were the major drivers for today…. The market may have noted the still positive growth despite the lower-than-expected result,” UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion said in an email on Thursday.
The economy grew by 5.5% in the April to June period, the slowest in four years. This is also below the 6-7% GDP growth target of the government for 2019 and the 5.9% median estimate in a BusinessWorld poll of 15 economists last week.
Meanwhile, after the market’s close, the BSP announced that its policy-setting Monetary Board decided to cut the interest rate on the central bank’s overnight reverse repurchase facility by 25 bps to 4.25% as inflation pressures continue to ease. Accordingly, the rates on the overnight deposit and lending facilities were reduced to 3.75% and 4.75%, respectively.
“The Monetary Board noted that prospects for global economic activity are likely to remain weak amid sustained trade tensions among major economies. Domestically, the outlook for growth continues to be firm on the back of a projected recovery in household spending and the accelerated implementation of the government’s infrastructure spending program…,” the BSP said in its policy statement.
“The peso strengthened today as market participants took profits from the recent depreciation of the local currency earlier this week,” a trader said in an email on Thursday.
The peso returned to P52-per-dollar level on Wednesday amid heightened US-China trade tensions.
For today, the first trader sees the peso moving between P51.90 and P52.20 against the greenback, while a second trader expects it to range from P52 to P52.25. Mr. Asuncion, for his part, gave a forecast range of P51.80-P52.10. — BML