Peso inches lower vs dollar due to lingering recession concerns

By AMCS with Reuters | BusinessWorld
July 20, 2023

THE PESO inched lower against the dollar on Thursday amid lingering recession fears as the Chinese central bank held its key lending rates steady despite weaker-than-expected economic growth last quarter.

The local currency closed at P54.52 versus the dollar on Thursday, down by half a centavo from Wednesday’s P54.515 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Thursday’s session at P54.55 per dollar. Its weakest showing was at P54.56, while its intraday best was at P54.37 against the greenback.

Dollars traded went up to $1.14 billion on Thursday from the $1.05 billion seen on Wednesday.

“The peso continued to weaken amid lingering recession concerns after the Chinese central bank decided to keep its key prime lending rates steady despite weaker-than-expected economic growth in the second quarter,” a trader said in an e-mail.

China left its lending benchmarks unchanged on Thursday, after the central bank stood pat on a key policy rate earlier this week even as signs of a faltering economic recovery called for more stimulus, Reuters reported. The one-year loan prime rate (LPR) was kept at 3.55%, while the five-year LPR was unchanged at 4.2%.

China’s gross domestic product (GDP) grew just 0.8% in April to June from the previous quarter, on a seasonally adjusted basis, data released by the National Bureau of Statistics showed on Monday.

On a year-on-year basis, GDP expanded 6.3% in the second quarter, accelerating from 4.5% in the first three months of the year.

The peso slipped on expectations of another 25-basis-point (bp) rate hike from the US Federal Reserve next week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The US central bank will hold its policy meeting on July 25-26.

The Fed paused its tightening cycle in June after hiking its benchmark rate by a cumulative 500 bps to a range between 5% and 5.25%.

For Friday, the trader said the peso could weaken further due to expectations of higher US jobless claims.

Both the trader and Mr. Ricafort see the peso moving between P54.40 and P54.60 per dollar on Friday.