The peso sank to the PHP 55-per-dollar level on Wednesday after Fitch Ratings downgraded the United States’ credit rating.
The local currency closed at PHP 55.19 versus the dollar on Wednesday, weakening by 42 centavos from Tuesday’s PHP 54.77 finish, data from the Bankers Association of the Philippines’ website showed.
This was the peso’s weakest close since its PHP 55.25-per-dollar finish on July 11.
The local unit opened Wednesday’s session at PHP 54.84 per dollar, which was also its intraday best. Its weakest showing of the day was at PHP 55.20 against the greenback.
Dollars traded rose to USD 1.1 billion on Wednesday from the USD 972.5 million seen on Tuesday.
“The peso weakened after Fitch downgraded the US sovereign credit rating from ‘AAA’ to ‘AA+’, citing concerns on the growing US fiscal deficit,” a trader said in an e-mail.
This move resulted in profit taking in global stock markets, which dragged down the peso, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.
Rating agency Fitch on Tuesday downgraded the US government’s top credit rating, a move that drew an angry response from the White House and surprised investors, coming despite the resolution of the debt ceiling crisis two months ago, Reuters reported.
Fitch downgraded the United States to “AA+” from “AAA,” citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.
Asian stocks and US Treasury yields declined on Wednesday after Fitch’s move.
MSCI’s broadest index of Asia-Pacific shares slid by 1.9%. Japan’s Nikkei dropped by 1.8%, while Australian shares tumbled by 2.3%.
US stock futures, the S&P 500 e-minis, pointed 0.2% lower on Wednesday.
The Philippine Stock Exchange index declined by 110.52 points or 1.67% to close at 6,483.28 on Wednesday, while the broader all shares index went down by 52.09 points or 1.48% to 3,463.86.
For Thursday, the trader said the peso could weaken further against the dollar ahead of potentially robust US labor data this week.
The trader sees the peso moving between PHP 55.15 and PHP 55.30 per dollar on Thursday, while Mr. Ricafort sees it trading from PHP 55.10 to PHP 55.30. — A.M.C. Sy with Reuters
This article originally appeared on bworldonline.com