THE PESO weakened further versus the dollar on Thursday on recession fears and ahead of the European Central Bank’s (ECB) policy meeting, where it is expected to raise rates for the first time in 11 years.
The local unit closed at P56.35 versus the greenback on Thursday, down by six centavos from its P56.29 finish on Wednesday, according to the Bankers Association of the Philippines. Year to date, this is 10.4% or P5.35 lower its close of P51 versus the dollar on Dec. 31, 2021.
The peso opened Thursday’s session at P56.34 against the dollar. Its weakest showing was at P56.43, while its intraday best was at P56.26 versus the greenback.
Dollars exchanged decreased to $647.45 million on Thursday from $710.05 million on Wednesday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso ended weaker on gloomy global market sentiment amid signs of a recession in the United States.
“US existing home sales declined to 2-year lows. Microsoft is slowing hiring in some groups. Ford plans up to 8,000 job cuts to help fund investments in electric vehicles,” Mr. Ricafort added.
The peso also declined “amid the recent uptick in the benchmark 10-year US Treasury yield to among three-week highs at 3.05% and recent net increase in global crude oil prices near $100 per barrel, still among one-week highs,” he added.
Brent crude futures dropped by $2.36, or 2.2%, to $104.56 a barrel by 0816 GMT after slipping 0.4% in the previous session. US West Texas Intermediate crude futures fell by $2.49, or 2.5%, to $97.39 a barrel following a 1.9% drop on Wednesday.
Oil prices have been volatile as traders have had to square tighter global supply because of the loss of Russian barrels following the country’s invasion of Ukraine, with recessionary worries that could weaken energy demand, Reuters reported.
“The markets are also anticipating an interest rate hike by the European Central Bank,” Mr. Ricafort said.
The ECB is set to deliver its first rate hike in 11 years overnight against a difficult economic backdrop exacerbated by the war in Ukraine. The rate hike could also affect oil demand.
For Friday, Mr. Ricafort gave a forecast range of P56.20 to P56.40 against the dollar. — KBT with Reuters