Peso weakens vs dollar on downgraded GDP growth goal, Fed minutes

THE PESO weakened versus the greenback on Thursday after the government slashed its growth target and amid hawkish hints in the minutes of the US Federal Reserve’s July meeting.

The local unit closed at P50.55 per dollar on Thursday, losing 12 centavos from its P50.43 finish on Wednesday, data from the Bankers Association of the Philippines showed.

The peso opened Thursday’s session at P50.48 versus the dollar. Its weakest showing was at P50.62, while its intraday best was at P50.40 against the greenback.

Dollars exchanged climbed to $1.084 billion on Thursday from $796.1 million on Wednesday.

The peso depreciated after the government downwardly revised its 2021 growth target due to the reimposition of strict lockdowns to control the Delta-driven surge in coronavirus cases, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The Development Budget Coordination Committee on Wednesday slashed its gross domestic product (GDP) growth target to 4-5% from its already-downgraded 6-7% goal.

The economy grew by 11.8% in the second quarter, bringing GDP growth for the first half to 3.7%, still short of the new target.

Meanwhile, a trader attributed the peso’s weakness to the minutes of the Fed’s July meeting.

Federal Reserve officials felt their employment benchmark for decreasing support for the economy “could be reached this year,” but appeared to disagree on other key aspects of where monetary policy should turn next in the transition from the pandemic crisis, according to minutes from last month’s policy meeting.

The account of the July 27-28 meeting showed Fed officials largely expect that later this year they will reduce the central bank’s emergency monthly purchases of $120 billion of Treasury bonds and mortgage-backed securities.

But consensus on other key issues appeared elusive, including the start date and pace of the bond-buying “taper,” and whether the bigger risk to the recovery is posed by inflation, ongoing joblessness, or the lurking chance that a resurgent coronavirus may throw things into reverse, Reuters reported.

For Friday, Mr. Ricafort gave a forecast range of P50.40 to P50.60 per dollar, while the trader expects the local unit to move around P50.45 to 50.70. — LWTN with Reuters

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