THE PESO strengthened on Tuesday as the dollar softened after US manufacturing data contracted for a fourth straight month in October, indicating a slowing US economy due to high inflation and rising interest rates.
The local unit ended trading at P58.78 per dollar on Tuesday, appreciating by nine centavos from its P58.87 close on Monday, based on data from the Bankers Association of the Philippines.
The peso opened Tuesday’s session at P58.87 per dollar, which was also its weakest showing. Meanwhile, its intraday best was at its close of P58.78 against the greenback.
Dollars exchanged fell to $561 million on Tuesday from $633 million on Monday.
The peso strengthened on the back of softer US manufacturing and services data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“Slight improvement in risk sentiment as some market participants react to disappointing US data overnight,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa likewise said in a Viber message.
“Contracting manufacturing and services data could suggest that rate hikes carried out by the Federal Reserve are boring through the US growth engine,” Mr. Mapa said.
US business activity contracted in October, with manufacturers and services firms reporting weaker client demand.
S&P Global said on Monday that its flash US Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 47.3 this month from a final reading of 49.5 in September. A reading below 50 indicates contraction.
The Fed last month delivered a third straight 75-basis-point (bp) rate hike and is expected to fire off an increase of the same magnitude at its Nov. 1-2 meeting.
“Global market sentiment is also supported by the rally in UK bond prices, manifesting support for incoming UK Prime Minister Rishi Sunak after UK market volatility in recent weeks,” Mr. Ricafort said.
“The peso was also stronger after the local stock market gauge, the PSEi (Philippine Stock Exchange index), gained for the second straight day,” he added.
The benchmark PSEi gained 44.62 points or 0.74% to end at 6,073.41 on Tuesday, while the broader all shares index rose by 16.45 points or 0.51% to close at 3,233.12.
For Wednesday, Mr. Ricafort gave a forecast range of P58.65 to P58.85 per dollar. — Keisha B. Ta-asan