THE PESO dropped on Tuesday to close at its worst in nearly two months due to weaker-than-expected data and strong demand for the dollar.
The local unit closed at P51.44 versus the greenback, down 19.5 centavos from Monday’s P51.245-per-dollar finish. This is the peso’s weakest finish since its P51.59-a-dollar close last Aug. 18.
The peso opened on a stronger note at P51.20 per dollar, and even hit at a peak of P51.16. Its intraday low was at P 51.46 against the greenback.
Dollars traded stood at $929.3 million, up from the $657.8 million recorded the previous trading session.
A trader said the drop was due to trade data that the Philippine Statistics Authority released yesterday.
“The trade data was worse than expected. We’re at a deficit. The dollar weakened against major and regional currencies, but when trade data came out, we saw the dollar strengthen against the peso,” the trader said in a phone interview.
The Philippine Statistics Authority on Tuesday released data on August exports and imports. Exports in the eight months to August rose 13.3% to $42.11 billion from a year ago, while imports were up 8.2% at $59.15 billion from a year ago.
The trade deficit of $2.41 billion in August was wider than the previous month’s $1.65 billion gap.
Another trader said the drop was mainly due to strong dollar demand because of maturing non-deliverable forwards (NDF).
“There was a couple of NDF maturity that needs to be covered. Basically, that’s the only reason why the dollar went up,” the second trader said in a separate phone interview. “When the NDF matures, there’s going be a strong demand for dollars. All matured simultaneously overseas.”
Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines, meanwhile said the decline was unexpected amid rising tensions between US and North Korea.
“The peso unexpectedly depreciated today due to safe-haven buying amid reports about another missile testing in North Korea and continued expectations of one more US rate hike this year,” Mr. Dumalagan said in an e-mail on Tuesday.
For today’s session, traders shared mixed views on the peso-dollar pair’s movement.
“I don’t think it will go high. That is already enough, the there is no more demand. So it could already correct,” said the first trader.
Meanwhile, the second trader noted that the peso may weaken further. “I expect New York will be coming back from a holiday, you might see the dollar strengthen, with the peso to further test the year-to-date resistance of P51.63.”
Mr. Dumalagan also said that the peso may weaken “due to likely hawkish speeches from [Minneapolis Fed President Neel] Kashkari and [Dallas Fed President Dennis] Kaplan.”
The first and second traders expect a range of P51.20-P50.70 and P51.30-P50.60, respectively, for today’s session, while Mr. Dumalagan expects the peso to trade within P51.20 to P51.50 against the dollar. — EJCT with Reuters