Peso weakens further on fears of slowdown in global growth

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THE PESO dropped after the International Monetary Fund downgraded its global growth outlook.

THE PESO declined anew against the dollar on Tuesday, touching the P53-per-dollar level intraday, amid persistent safe-haven demand following the downward revision of the International Monetary Fund’s (IMF) global growth forecast.

The local unit ended the session at P52.93 versus the greenback yesterday, 13 centavos lower than the P52.80-per-dollar finish last Monday.

The peso opened the session slightly stronger at P52.77 against the greenback, which was also its intraday high. Meanwhile, it slid to as low as P53.04 per US currency during Tuesday’s session.

Dollars traded surged to $1.234 billion from the $1.006 billion that switched hands the previous day.

A foreign exchange trader said the peso declined further versus the greenback as market players continued to flock to safe-haven currencies such as the dollar after the IMF flagged increasing risks of a global growth slowdown.

The IMF said in its World Economic Outlook released on Monday that the global economy will grow at a 3.5% pace in 2019, down 0.2 percentage points from the previous forecast, Reuters reported.

“After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising,” IMF Managing Director Christine Lagarde said.

The IMF cited the slower-than-expected growth of China buoyed by its unsettled trade spat with the United States as well the possible exit of the United Kingdom to the European Union without a deal, as these could worsen market volatility.

“The peso weakened on safe-haven dollar demand after the IMF flagged increasing risks of a global growth slowdown amid the ongoing US-China trade war,” the trader said in an e-mail.

However, another trader downplayed the effects of IMF’s lower growth projection on the peso as this sentiment was already priced in by the market.

“I think the market mover is still the government shutdown in the US. I think there could be a compromise soon,” the trader said via phone interview.

For today, the traders expect the peso to trade between P52.80 and P53.10 versus the dollar.

Most Asian currencies also weakened on Tuesday as a slowdown in China’s economy stoked worries over regional and global growth, denting the appetite for riskier assets.

China, the world’s second-largest economy, grew 6.4% in the fourth quarter from a year earlier, the slowest pace since the depths of the global financial crisis, data showed on Monday. Full-year growth of 6.6% was the weakest in nearly three decades, and activity is expected to cool further in coming months. — Karl Angelo N. Vidal with Reuters