Peso weakens vs dollar on US GDP growth data

THE PESO declined due to better-than-expected US economic growth. — BW FILE PHOTO

THE PESO weakened against the dollar on Monday due to a stronger-than-expected US gross domestic product (GDP) report.

The peso closed Monday’s session at P51.09 versus the greenback, 3.5 centavos weaker than its P51.055-per-dollar finish on Friday.

The peso opened the session at P51.005 per dollar, surging to as high as P50.93 intraday. However, its worst showing stood at P51.10 against the US currency.

Trading volume thinned to $767.25 million from the $859.34 million that switched hands the previous session.

A trader said the peso traded within a tight range yesterday, strengthening initially as it rode on Friday’s momentum.

“However, it was quickly supported at around P50.95 and it eventually (weakened) in line with other currencies as the dollar strengthened during Asia time,” the trader said in a phone interview.

Another trader said the local unit weakened on reduced bets of a 50-basis-point cut in the US Federal Reserve policy rate cut following the release of a stronger-than-expected second-quarter GDP report.

US economic growth slowed to 2.1% in the second quarter from 3.1% the previous quarter, even as strong consumer spending tempered the effects of declining exports and smaller inventory build.

However, the economy slowed less than expected from the 1.8% expected by economists polled by Reuters.

“I think the market is just on a wait-and-see mode and trade within range ahead of the Fed meeting this week,” the first trader added.

The US central bank is widely expected to cut interest rates by at least 25 basis points during the July 30-31 meeting of its policy-setting Federal Open Market Committee.

Earlier this month, Fed chair Jerome Powell hinted on a cut in benchmark rates, saying the central bank will “act as appropriate” to sustain expansion as “crosscurrents” such as trade tensions and concern on global growth are weighing on the economy.

For today, the first trader expects the peso to trade between P50.95 and P51.15 versus the dollar, while the other gave a P51-P51.20 range.

Most Asian currencies also lost steam on Monday as the dollar strengthened on the back of strong US GDP data and investors remained cautious ahead of this week’s Federal Reserve meeting where a rate cut has been largely priced in.

Investors will also be watching the resumption of Sino-US talks as the world’s top two economies make yet another attempt to resolve their differences on trade and other issues that have roiled financial markets for over a year now.

The dollar clung to a two-month high against a basket of currencies in Asia after better-than-expected US GDP data last week enhanced its yield attraction against rival currencies. — Karl Angelo N. Vidal with Reuters