Philippine peso slips as Middle East tensions, weak FDI data weigh on trading
Risk aversion in global markets and softer capital inflow data are pushing the Philippine peso slightly lower against the dollar in Tuesday trade. The local currency closes at P62.80 per dollar, with traders expecting rangebound movement next as markets await key U.S. inflation data and signals on Federal Reserve policy.
Highlights
- Philippine peso weakens by four centavos to P62.80 per dollar on Tuesday, hurt by Middle East tensions and FDI data.
- Bangko Sentral ng Pilipinas reports July net FDI inflows fell 44.1% year on year to $689 million, the lowest annual growth since April.
- Total net FDI inflows for January to July decreased 23.9% to $4.071 billion, with BSP still projecting $6.5 billion for full year.
Market drivers and Tuesday trading moves
As reported by BusinessWorld Online, the Philippine peso declines by four centavos to close at P62.80 against the dollar on Tuesday, from P62.76 on Monday, based on Bankers Association of the Philippines data.The local unit opens nearly flat at P62.75 per dollar, rises to an intraday high of P62.70, and falls to a low of P62.869. Dollar volume traded inches down to $1.022 billion from $1.056 billion.
A trader says renewed tensions in the Middle East are boosting demand for the safe-haven dollar, while markets are also waiting for key U.S. inflation data for clues on the next move by the U.S. Federal Reserve.
FDI weakness and peso outlook
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort says the peso is also being dragged lower by data showing a drop in Philippine foreign direct investment inflows.Preliminary Bangko Sentral ng Pilipinas data show net FDI inflows fall 44.1% year on year to $689 million in July from $1.233 billion a year earlier. Even so, the July figure is the highest in six months, or since the $799 million recorded in January, although it marks the first annual decline since April.
For the first seven months of the year, net FDI inflows decline 23.9% to $4.071 billion from $5.35 billion a year earlier. The BSP's latest projections still put full-year net FDI inflows at $6.5 billion.
For Wednesday, the trader says the peso could move between P62.60 and P62.90 per dollar as investors await U.S. data, while Ricafort sees a P62.70 to P62.90 range. Weakness in the currency reflects how external geopolitical risks and softer investment inflows continue to shape sentiment toward the Philippines market.
In our earlier update on U.S. Treasury yields, we noted that yields edged lower as oil prices pulled back, easing some pressure on borrowing costs. The piece also highlighted that traders were positioning ahead of key U.S. inflation releases that could shift expectations for the Federal Reserve’s next policy move and ripple through broader markets.
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