Peso dips on report of reduced US growth forecast

MANILA, Philippines—The peso closed at less value on Thursday as investors reacted negatively to news that the US Federal Reserve cut its 2011 growth forecast for the United States.

The local currency closed at 43.495 against the US dollar on Thursday, down by 13.5 centavos from the previous day’s finish of 43.36:$1.

Intraday high hit 43.44:$1, while intraday low settled at 43.525:$1. Volume of trade amounted to $771.12 million, down from $816.97 million previously.

Traders said the lower growth outlook for the US economy prompted some investors to shy away, perhaps temporarily, from emerging economies like the Philippines.

Since the US economy has a significant influence on the global economy, the less favorable outlook by the US Fed on the world’s largest economy is seen to decelerate the global economy’s recovery from the latest turmoil, according to traders.

Even if emerging Asian markets have better macro-economic fundamentals than the United States, investors still opt to stay away from assets issued in Asian markets in times of uncertainty. Traders say these assets are still perceived as risky compared with US dollar-denominated ones.

The US Fed has slashed its growth outlook for the US economy for 2011 to a range of 2.7 to 2.9 percent, compared with its projection two months ago of between 3.1 and 3.3 percent.

The reduction of the growth forecast took into account moves of American consumers to spend less on goods and services, as oil prices increase.