Currencies 3 MIN READ

Peso weakens further on strong US labor data

August 4, 2023By BusinessWorld

The peso depreciated further on Thursday as stronger-than-expected US labor data pushed the dollar to a four-week high.

The local currency closed at a fresh three-week low of PHP 55.52 versus the dollar on Thursday, weakening by 33 centavos from Wednesday’s PHP 55.19 finish, data from the Bankers Association of the Philippines’ website showed.

This was the peso’s weakest close since its PHP 55.69-a-dollar close on July 11.

The local unit opened Thursday’s session at PHP 55.30 per dollar. Its intraday best was at PHP 55.27, while its weakest showing of the day was at PHP 55.565 against the greenback.

Dollars traded rose to USD 1.28 billion on Thursday from the USD 1.1 billion seen on Wednesday.

The peso dropped as the dollar rose following the release of strong US labor data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar scaled a four-week peak against major peers on Thursday after upbeat labor market data a day earlier, while sterling edged lower ahead of an expected rate hike from the Bank of England, Reuters reported.

The dollar index, which measures the currency against six major peers, rose as high as 102.84, the highest level in four weeks. It was last up 0.1% at 102.73, extending Wednesday’s 0.5% gain.

US private payrolls rose more than expected in July as small businesses boosted hiring, pointing to continued labor market resilience that could shield the economy from a recession.

Private payrolls increased by 324,000 jobs last month after surging by 455,000 in June, according to ADP. Economists polled by Reuters had forecast private employment would increase by 189,000.

“The peso depreciated further amid lingering concerns on the global economy after Fitch’s downgrade to the US sovereign credit rating,” a trader added in an e-mail.

Fitch Ratings’ downgrade of the US credit rating is likely to exacerbate unease about the country’s debt position, political polarization and the global standing of the US dollar, investors and analysts said.

The credit rater on Tuesday downgraded the US government’s top credit rating 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.

For Friday, the trader said the peso could recover on potentially slower July Philippine inflation.

The trader sees the peso moving between PHP 55.30 and PHP 55.55 per dollar on Friday, while Mr. Ricafort sees it trading from PHP 55.40 to PHP 55.60. — AMCS with Reuters

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