August 25, 2022

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Peso flat ahead of second US GDP estimate

THE PESO inched higher against the dollar on Thursday as market players await the release of a new estimate for the United States’ second-quarter economic performance.

The local unit closed at P56.06 per dollar on Thursday, gaining a centavo from its P56.07 finish on Tuesday, based on data from the Bankers Association of the Philippines.

There was no foreign exchange trading on Wednesday as work was suspended due to severe tropical storm Florita.

The peso opened Thursday’s session at P55.95 versus the dollar. Its weakest showing was at P56.09, while its intraday best was at P55.90 against the greenback.

Dollars exchanged rose to $1.06 billion on Thursday from $864.05 million on Tuesday.

“The peso closed almost flat due to some caution ahead of the second release of the second-quarter US GDP (gross domestic product) report,” a trader said in an e-mail.

Real GDP decreased at an annual rate of 0.9% in the second quarter, according to the advance estimate released by the US Bureau of Economic Analysis last month. In the first quarter, real GDP contracted by 1.6%.

The advance GDP estimate is based on source data that are incomplete or subject to further revision. The second estimate for the second quarter, based on more complete data, was set to be released overnight.

The peso was also stronger after the local stock market went up higher for the second straight day, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The bellwether Philippine Stock Exchange index climbed by 62.98 points or 0.94% to close at 6,706.43 on Thursday, while the broader all shares index went up by 23.95 points or 0.67% to 3,565.28.

“The peso also slightly stronger amid progress on tax reform proposals at the House of Representatives related to mining and rationalizing the tax exemption of pick-up trucks, among others,” Mr. Ricafort added.

The House Ways and Means Committee on Wednesday approved the new fiscal regime for the mining sector, as well as the fourth package of the Comprehensive Tax Reform Program that includes the removal of the excise tax exemption on pickup trucks.

Under the approved version, a royalty tax of 5% will be slapped on the market value of gross output of all large-scale mining operations.

The bill also seeks to improve transparency through a government system for the public disclosure and scrutiny of all mining tax and revenue data in the extractives value chain.

For Friday, the trader said the peso may weaken on expectations of hawkish remarks from Federal Reserve Chair Jerome H. Powell at the Jackson Hole symposium that was set to start overnight.

The trader and Mr. Ricafort expect the peso to move from P55.95 to P56.15 versus the dollar on Friday. — Keisha B. Ta-asan