Peso falls as state of world economy remains uncertain

AFP PHOTO/ROMEO GACAD

MANILA, Philippines—The peso fell on Wednesday as fund owners focused on the uncertainty of how the world economy would perform over the short term amid the absence of solid indicators of faster growth.

The local currency closed at 42.345 against the US dollar, down by 5 centavos from the previous day’s finish of 42.295:$1.

Intraday high hit 42.31:$1, while intraday low settled at 42.39:$1. Volume of trade amounted to $767.4 million from $705.7 million previously.

The depreciation of the peso came a day before the speech of US Federal Reserve Ben Bernanke on whether the US central bank would inject more funds into the US economy to fuel its still lackluster growth.

The decline of the local currency also came amid opinions that previous expectations for the US Fed and the European Central Bank to implement more stimulus measures could be too optimistic.

Traders said uncertainty over what policy moves would be taken by central banks of the two major economic territories pushed investors to the sidelines and dampened appetite for some peso-denominated securities.

The decline of the peso also came amid unclear signals as to how the US economy would improve or slow down over the short term. Although there were reports of a modest rise in retail or home sales, there were also reports of a rise in unemployment benefit claims.

On the domestic front, the Philippine government is expected to announce on Thursday how the Philippine economy performed in the second quarter of the year.

Traders said some investors stayed at the sidelines while waiting for the report on the second-quarter growth of the country’s gross domestic product (GDP).

The Philippine economy, measured in terms of GDP, grew by 6.4 percent in the first quarter from a year ago.

The government targets a full-year growth of 5 to 6 percent.