Peso weakens vs the dollar as UK, euro zone data spark recession fears

THE PESO weakened against the dollar on Wednesday amid weaker manufacturing data in Europe that roused fears of a global recession.

The local currency closed at PHP 54.63 versus the greenback on Wednesday, dropping by 19.5 centavos from Tuesday’s PHP 54.435 finish, data from the Bankers Association of the Philippines showed.

The peso opened Wednesday’s trading session at PHP 54.75 per dollar. Its weakest showing was at PHP 54.79, while its intraday best was at PHP 54.53 against the greenback.

Dollars traded went down to USD 1.02 billion from USD 1.05 billion on Tuesday.

“The peso weakened as the downbeat manufacturing PMI (purchasing managers’ index) reports from the United Kingdom and Europe have renewed market concerns of a recession this year,” a trader said in an e-mail.

The S&P Global/CIPS flash composite PMI dropped to 47.8 in January from 49 in December, at the bottom end of economist forecasts, as businesses blamed higher Bank of England interest rates, strikes and weak consumer demand for the slowdown, Reuters reported.

Meanwhile, separate data showed euro zone business activity made a surprise return to modest growth in January. The dollar edged lower against the euro on Tuesday on the data and as US business activity shrank for a seventh straight month.

The dollar, which briefly gained on the euro after the US data, slipped to trade lower on the day, not far from the nine-month lows hit in the previous session.

The euro was 0.09% higher at $ 1.0881, just shy of the nine-month high of $ 1.0927 touched on Monday.

The peso also weakened on weak local agriculture data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Farm output shrank 1% in the fourth quarter of 2022 due to damage in the sector caused by typhoons and higher inflation, the Philippine Statistics Authority (PSA) reported on Wednesday.

Mr. Ricafort added that third-quarter Philippine gross domestic product (GDP) growth being maintained by the PSA at 7.6% also contributed to the peso’s decline.

For Thursday, the trader said the peso could recover against the dollar on expectations of robust Philippine GDP growth for the fourth quarter and full-year 2022.

The trader sees the peso trading between PHP 54.50 and PHP 54.75 against the dollar, while Mr. Ricafort expects it to move from PHP 54.55 to PHP 54.75. — AMCS with Reuters