THE PESO weakened on Thursday despite positive developments regarding the US-China trade war and slower Philippine inflation in August.
The local unit ended at P52.01 against the greenback on Thursday, shedding 7.5 centavos from its P51.935-per-dollar close on Wednesday.
The peso opened stronger at P51.885 versus the dollar but succumbed to end weaker. Its weakest point recorded at P52.02, while its intraday best was at P51.82 against the greenback.
Dollars traded on Thursday climbed to $1.449 billion from the $1.282 billion seen on Tuesday.
“The peso weakened against the greenback amid expectations of further easing from BSP (Bangko Sentral ng Pilipinas) amid benign August inflation. The below-target inflation rate gives BSP more room to continue its easing cycle,” one trader said.
Meanwhile, another trader said that the positive developments in the US-China trade war affected the currency market.
“The market could be expecting another rate cut with an improvement of the US-China trade talks as they agreed for a discussion in Washington by October.”
Headline inflation slowed to 1.7% last month from July’s 2.4%, the Philippine Statistics Authority reported yesterday, falling within the BSP’s 1.3%-2.1% estimate range for the month and slower than the 1.8% median in BusinessWorld’s poll of 12 economists late last week.
Year-to-date, inflation is at 3%, well within the BSP’s 2-4% target range for the year, albeit still above the central bank’s 2.6% forecast.
BSP Governor Benjamin E. Diokno last week said the central bank is looking to cut benchmark rates by another 25 bps before the end of the year.
The central bank has cut interest rates by a total of 50 bps so far this year to 4.25% for the overnight reverse repurchase rate, 4.75% for overnight lending and 3.75% for overnight deposit.
The BSP’s Monetary Board will have its next policy meeting on Sept. 26.
Meanwhile, China and the United States agreed to hold high-level trade talks in early October in Washington, China’s commerce ministry said on Thursday, amid fears that an escalating trade war could trigger a global economic recession.
Trade teams from the two countries will hold talks in mid-September before the high-level talks next month, the ministry said. Both sides agreed to take actions to create favorable conditions, it said.
For today, traders said the peso may weaken amid expectations of further rate cuts here and in advanced economies.
The first trader expects the peso to move within P51.90-52.10 against the dollar today, while the second trader sees it ranging from P51.60 to 51.20. — L.W.T. Noble with Reuters