The peso declined further against the dollar on Wednesday after S&P Global Ratings downgraded several US lenders.
The local currency closed at PHP 56.73 versus the dollar on Wednesday, weakening by 35 centavos from Tuesday’s PHP 56.38 finish, data from the Bankers Association of the Philippines’ website showed.
The local unit opened Wednesday’s session at PHP 56.32 per dollar. Its intraday best was at PHP 56.30, while its weakest showing was at PHP 56.75 against the greenback.
Dollars traded rose to USD 1.56 billion on Wednesday from the USD 1.44 billion on Tuesday.
“The peso weakened from market caution after S&P recently downgraded the credit ratings of various small- and medium-sized banks,” a trader said in an e-mail.
Shares of several US banks fell on Tuesday, the day after ratings agency S&P Global followed Moody’s in cutting its credit ratings on some regional lenders with high commercial real estate (CRE) exposure, Reuters reported.
S&P’s action will make borrowing more costly for a banking sector aiming to recover from a crisis earlier this year, when three regional lenders failed, prompting broader industry turmoil.
S&P on Monday cut ratings on Associated Banc-Corp and Valley National Bancorp on funding risks and higher reliance on brokered deposits.
It also downgraded UMB Financial Corp. and Comerica Bank citing deposit outflows and higher interest rates. The rating agency also cut KeyCorp’s ratings on the back of constrained profitability.
S&P also lowered its outlook for S&T Bank and River City Bank to “negative” from “stable,” citing higher CRE exposure.
The peso weakened ahead of US Federal Reserve Chair Jerome H. Powell’s speech on Friday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Mr. Powell is scheduled to deliver a speech on the economic outlook at the Kansas City Jackson Hole Economic Policy Symposium this weekend.
For Thursday, the trader said the peso could depreciate further against the dollar due to potentially strong US manufacturing, services and Purchasing Managers’ Index reports overnight.
The trader sees the peso moving between PHP 56.65 and PHP 56.85 per dollar on Thursday, while Mr. Ricafort expects it to range from PHP 56.60 to PHP 56.85. — AMCS with Reuters