Peso back down to 51:$1

The peso on Tuesday slid back to the weaker 51:$1 level, closing at 51.1:$1 partly due to the impact on consumption of the first tax reform package.

It was the peso’s weakest close in over two months, or since Nov. 14 last year’s 51.18:$1.

At the Philippine Dealing System, the peso reached an intraday low of 51.145:$1 and a high of 50.8:$1 after opening at 50.82:$1.

The total volume traded inched up to $878.5 million from $868.5 million last Monday.

“Import demand for US dollar remains strong with the income tax cuts of the TRAIN generating demand for consumer durables including vehicles,” ING Bank Manila senior economist Joey Cuyegkeng said, referring to the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

“In addition, increased hedging activity together with higher international oil prices increases not only the import bill but also demand for US dollar. The demand had a more significant impact in a market when inflows (also from overseas Filipino workers) are seasonally becoming slow before rising again seasonally within two to three months,” Cuyegkeng added.

“The fourth-quarter gross domestic product (GDP) growth of 6.6 percent should not have had a major influence in the market since the pace of growth was more or less in line with consensus, while full-year growth of 6.7 percent was expected. Market continues to expect growth to be sustained at these levels in 2018, which is within striking distance of the government’s 2018 GDP growth target,” according to Cuyegkeng.

The government reported that the Philippine economy grew 6.7 percent in 2017, a slower pace than the 6.9-percent expansion in 2016 amid an election year.

The 6.6-percent GDP growth in the fourth quarter, meanwhile, was the same as a year ago but slower than the third quarter’s better-than-expected 7 percent.

The government had set the GDP growth target for 2017 at 6.5-7.5 percent.

This year, the government targets 7-8 percent growth.