Peso slumps to new all-time low

The peso strengthened against the dollar on Thursday as investor confidence got a boost after President Ferdinand R. Marcos, Jr. said the government is working to boost spending to support the economy amid a slowdown that was largely a consequence of a graft scandal involving allegedly anomalous flood control projects.

The local unit closed at PHP 59 per dollar, jumping by 17 centavos from its record-low PHP 59.17 finish on Wednesday, Bankers Association of the Philippines data showed.

The peso opened the session slightly stronger at PHP 59.13 against the greenback. Its intraday best was at PHP 58.99, while its worst showing was at PHP 59.19 versus the dollar.

Dollars traded went down to USD 1.42 billion on Thursday from USD 1.72 billion on Wednesday.

“The dollar-peso closed lower after President Marcos vowed to arrest and give jail time for suspects involved in the flood control projects as well as economic recovery in the fourth quarter, boosting investing confidence and lifting the peso,” a trader said in a phone interview.

On Thursday, Mr. Marcos pledged to ramp up government spending to help boost the economy after gross domestic product (GDP) grew by just 4% in the third quarter, the weakest in over four years.

In the first nine months, GDP growth averaged 5%, below the government’s 5.5%-6.5% full-year target.

For Friday, the trader expects the peso to move between PHP 58.80 and PHP 59.20 per dollar.

Decline to  PHP 60 possible

A second trader said in a text message that the peso could weaken to the PHP 60 level in the near term unless there are solid signs of economic recovery and improved risk sentiment.

A more dovish Bangko Sentral ng Pilipinas (BSP) versus a cautious US Federal Reserve could also hasten the peso’s depreciation.

For this reason, Bank of the Philippine Islands President and Chief Executive Officer Teodoro K. Limcaoco told reporters on Wednesday that the BSP is unlikely to deliver a jumbo 50-basis-point (bp) rate cut next month.

“I don’t think we would do a 50-bp cut. It’s drastic. It might send the wrong signal. And you have to look at what the Fed is doing because if you cut significantly faster than the Fed, that means a weak peso,” he said.

The BSP last month reduced benchmark rates by 25 bps for a fourth straight meeting, bringing the policy rate to 4.75%. Since starting its easing cycle in August last year, the Monetary Board has cut rates by a total of 175 bps.

BSP Governor Eli M. Remolona, Jr. earlier said another cut at their Dec. 11 meeting is possible, and more reductions are also likely next year amid the expected economic fallout from the flood control mess.

Meanwhile, the Fed last month also cut borrowing costs by 25 bps to bring its target rate to the 3.75%-4% range.

Fed Chair Jerome H. Powell has said that a cut at their December review is not guaranteed as they remain cautious amid a mostly mixed economic picture. — Aaron Michael C. Sy