THE PESO declined against the dollar on Wednesday as latest data showed the country posted another balance of payments deficit in June. — BW FILE PHOTO
THE PESO weakened against the dollar on Wednesday as the country’s balance of payments (BoP) position was at a deficit in June.
The local unit closed at P56.29 per dollar on Wednesday, losing 3.5 centavos from its P56.255 finish on Tuesday, based on Bankers Association of the Philippines data.
Year to date, it has weakened by 10.3% or by P5.29 from its close of P51 versus the dollar on Dec. 31, 2021.
The peso opened Wednesday’s session at P56.18 versus the dollar, which was also its intraday best. Its weakest showing was at P56.35 against the greenback.
Dollars exchanged rose to $710.05 million on Wednesday from $663.05 million on Tuesday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso weakened versus the dollar as latest BoP data released by the Bangko Sentral ng Pilipinas (BSP) on Tuesday showed the country’s external position was at a deficit last month.
The country’s BoP position stood at a $1.57-billion deficit, wider than the $312-million gap booked a year ago. Still, this was lower than the $1.61-billion deficit recorded in May, which was the widest gap since $2.019 billion seen in February 2021.
In the first half of the year, the country’s BoP deficit widened to $3.1 billion from the $1.9 billion recorded in the same period in 2021.
The BSP expects the country’s BoP to yield a deficit of $6.3 billion this year or equivalent to -1.5% of gross domestic product.
The peso also weakened due to concerns over rising coronavirus disease 2019 (COVID-19) cases in the country, Mr. Ricafort said.
“The peso weakened due to some caution ahead of the US existing home sales report,” a trader said in an e-mail.
“The local currency might appreciate [on Thursday] as expectations of an ECB (European Central Bank) rate hike could taper some of the greenback’s strength,” the trader added.
ECB policy makers are considering raising interest rates by a bigger-than-expected 50 basis points at their meeting on Thursday to tame record-high inflation, two sources with direct knowledge of the discussion told Reuters.
To cushion the impact of the higher borrowing costs, policy makers are also expected to announce a deal to help indebted countries like Italy on the bond market. The deal will require they stick to European Commission rules on reforms and budget discipline, the sources said.
The ECB is set to deliver its first rate hike in more than a decade on Thursday against a difficult economic backdrop exacerbated by the war in Ukraine. Inflation is high and rising while economic growth has slowed and a political crisis in Italy is keeping investors on edge.
That dynamic creates a balancing act for the ECB, between raising rates to curb price growth and ensuring that the most indebted of the euro zone’s 19 member countries don’t run into financial trouble as a result.
The trader expects the local unit to move within P56.20 to P56.40 per dollar on Thursday, while Mr. Ricafort gave a forecast range of P56.15 to P56.35. — K.B. Ta-asan with Reuters