Lower GDP drags peso despite BSP rate hike

The Philippine peso closed weaker on Friday, even after the Bangko Sentral ng Pilipinas decided to raise interest rates, as the slower second quarter economic performance kept investors cautious.

The local currency shed 4.5 centavos to close at P53.135:$1 from 53.090 on Thursday.

“The BSP rate hike could have driven the peso up, but the lower GDP figures tempered its appreciation ... That’s why the peso just depreciated slightly,” Land Bank of the Philippines market economist Guian Angelo Dumalagan said.

The BSP on Thursday raised its policy rates by 50 basis points, the third and most aggressive move of the central bank so far this year in light of persistent inflationary concerns.

“Apart from the lower GDP, investors stayed on the sidelines ahead of the release of the US inflation figures tonight, which could signal more interest rate hikes by the US Federal Reserve,” Dumalagan noted.

The economy as measured by the gross domestic product (GDP) slowed down to 6.0 percent in the second quarter of 2018 from 6.7 percent a year earlier.

Week-on-week, the peso gained 1.5 centavos from P53.15:$1 on August 3. It was weaker by P3.325 from 49.810 on Jan. 3, the first trading day of 2018. —VDS, GMA News