THE PESO dropped against the dollar on Friday, recording a new near 12-year low, following the Bangko Sentral ng Pilipinas’ (BSP) reserve requirement cut.
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 a fresh low for the peso, being its weakest in nearly 12 years or since July 19, 2006’s 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 went down to $719 million from the $899.95 million logged the previous trading.
A foreign exchange trader said the peso weakened following BSP’s announcement of a cut in banks’ reserve requirement ratio.
“We broke past the resistance level again because of the BSP cutting reserve requirements,” the trader said in a phone interview. “That’s bearish for the peso.”
In a statement issued after markets closed on Thursday, the BSP 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 that took effect last 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 lending and other uses.
However, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the reserve requirement cut should not have any impact on the peso.
“I’m expecting it has no impact and it should not be a distraction from what is the monetary policy stance [of the BSP],” Mr. Asuncion told BusinessWorld on the sidelines of the Aboitiz-led lender’s annual stockholders’ meeting on Friday.
“I don’t think it will have any material or fundamental impact on the peso,” he added.
Meanwhile, another trader said on Friday: “The peso closed weaker today amid rather optimistic outlook on the US-North Korean summit despite uncertainties over the last 24 hours.”
US President Donald J. Trump called off its meeting with North Korean leader Kim Jong-un scheduled next month in Singapore, citing the “open hostility” of Pyongyang.
“The peso erased its gains in the afternoon trade as the North Korean government expressed its willingness to continue the talks surfaced later today, and closing weaker against the dollar,” the trader added. — Karl Angelo N. Vidal