THE PESO declined against the dollar on Thursday on expectations of another rate cut by the European Central Bank (ECB).
The local unit closed at P57.80 per dollar on Thursday, down by 10 centavos from its P57.70 finish on Wednesday, Bankers Association of the Philippines data showed.
The peso opened Thursday’s session at P57.79 against the dollar. It climbed to as high as P57.60, while its weakest showing was at P57.86 versus the greenback.
Dollars exchanged went up to $1.47 billion on Thursday from $1.38 billion on Wednesday.
The peso weakened as the dollar was generally stronger as markets awaited a rate cut from the ECB, a trader said by phone.
The peso-dollar pair initially traded sideways as investors recalibrated their bets on the pace of the US Federal Reserve’s easing cycle ahead of the presidential election, the trader added.
The euro slid to a more than two-month low on Thursday ahead of an expected European Central Bank rate cut, while the dollar hit its highest in 11 weeks on the prospect that Donald J. Trump, whose policies the market considers more bullish, will win the US election, Reuters reported.
Weak economic data in the euro area and dovish comments from ECB officials have prompted traders to price in that the ECB will deliver a third rate cut since June, diminishing the euro’s appeal.
The ECB was expected to cut its deposit rates by a quarter-point overnight. Money markets almost fully price in three further reductions through March 2025 to tame the most protracted inflation in the euro zone in a generation.
The euro slipped 0.1% $1.085325, falling for the seventh straight session.
In the broader market, the dollar scaled an 11-week high against a basket of peers at 103.65.
The dollar has drawn support from a run of upbeat data on the US economy, which has in turn caused traders to reduce their expectations of Fed rate cuts, but also on the higher chances of a victory by Republican presidential candidate Mr. Trump at next month’s election.
Analysts expect the dollar to strengthen in the event of a Trump victory and for bonds to come under pressure.
Meanwhile, the local unit declined “after the markets digested the more gradual or measured monetary easing signals from local monetary authorities,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.
The Bangko Sentral ng Pilipinas (BSP) on Wednesday cut benchmark interest rates by 25 basis points (bps), as expected by 16 of 19 analysts in a BusinessWorld poll. This brought its policy rate to 6%.
The Monetary Board in August started its policy easing cycle with a 25-bp reduction, marking its first rate cut in nearly four years.
BSP Governor Eli M. Remolona, Jr. said at a briefing that they could cut benchmark rates by another 25 bps at their Dec. 19 meeting, noting that a 50-bp reduction could be “too aggressive a cut,” except in a hard landing scenario.
Mr. Remolona added that they could slash rates by 100 bps in 2025, but said they prefer to take “baby steps” in their policy easing cycle.
For Friday, the trader sees the peso moving between P57.60 and P57.90 per dollar, while Mr. Ricafort expects it to range from P57.70 to P57.90. — A.M.C. Sy with Reuters
