Peso weakens over reports of Japan’s stalling economy

AFP FILE PHOTO

MANILA, Philippines—The peso weakened slightly on the first trading day of the week following reports that the Japanese economy contracted in the third quarter.

The local currency closed at 41.075 against the US dollar, down by 2.5 centavos from Friday’s finish of 41.05:$1.

Intraday high hit 41.06:$1, while intraday low settled at 41.13:$1.

Volume of trade amounted to $805.1 million from $834.24 million previously.

The decline of the peso came after the release of reports saying that the economy of Japan contracted by 3.5 percent in the third quarter from a year ago.

Traders said the discouraging performance of Japan, a key export market, dampened outlook even for emerging markets like the Philippines. Its contraction is blamed partly on weakness of the global economy that has dragged export earnings of Japanese firms and on weak domestic demand.

The contraction of the Japanese economy indicated that global economic problems led by the crisis in the eurozone have weighed down on the performance even of Asian markets, traders said.

Market players said, nonetheless, that the peso would likely remain stronger this year than its level in 2011. The local currency is expected to stay within the 41-to-a-dollar territory in the coming weeks, if not the rest of the year, given the Philippine economy’s relatively favorable performance so far this year.

The Philippines grew by 6.1 percent in the first half from a year ago.

At Monday’s close of 41.075, the peso has appreciated by over 6 percent from 43.84:$1 in the last trading day of 2011.