Weak GDP numbers point to more peso downside

MANILA  -The Philippine peso closed trading on Friday at 56.315:$1, its weakest position in almost nine months, possibly putting the local currency on a depreciation path as the US dollar holds out while other countries show worse economic signals than the United States.

At this level, the peso-dollar exchange rate is approaching the upper end of the Marcos administration economic team’s forecast for 2023, which they placed within 54-57 pesos against the greenback.

The peso lost 9.5 centavos to the US dollar from the 56.22:$1 closing rate on Aug. 10, to reach its weakest position since 56.50:$1 on Nov. 29 last year.

Also, the local currency has lost a total of P1.545 against the dollar since starting this month at 54.77:$1.

According to ING Bank, the US dollar remained relatively strong despite unspectacular economic data because the foreign exchange markets found no better alternative to the greenback.

“This is not to say that the activity outlook in the US is particularly bright, but if economic slowdown alarms are flashing yellow in Washington, they are flashing amber in Frankfurt and Beijing,” ING Bank said.

Meanwhile, Sumitomo Mitsui Banking Corp. said that a policy rate cut by Bangko Sentral ng Pilipinas (BSP) within this year was “highly probable” considering the slower-than-expected growth of Philippine output in the second quarter.

SMBC said the BSP might reduce its benchmark rate earlier than the United States Federal Reserve, which remains hawkish. If this happens, the interest rate differential between the United States and the Philippines will narrow.

“Based on the above outlook, the possibility of [the peso] depreciating against [the dollar] cannot be ruled out,” the Japanese banking group said.

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