Peso weakens on likely smaller US rate cut

The Philippine peso closed slightly weaker against the dollar on Monday, on dimmed hopes of an aggressive rate cut in the United States.

The local currency lost 3.6 centavos to close at P51.076:$1 versus last Friday's P51.04:$1.

"Most emerging market currencies were on the backfoot to open the week with Fed President Bullard disappointing investors who were hoping for an aggressive rate cut by the Fed as he outlined his preference for a 25 bps trimming of the policy rate," said Nicholas Antonio Mapa, senior economist at the ING Bank Manila in an email interview.

According to a report by Reuters, expectations for a 50 basis point cut were scaled back after the Wall Street Journal reported that the Fed was likely to cut rates by only 25 basis points.

The next meeting of the Federal Open Market Committee is scheduled on July 30 and 31, to discuss whether or not an adjustment in rates is warranted.

Mapa also noted that the market was awaiting cues regarding the fourth State of the Nation Address (SONA) of President Rodrigo Duterte.

"Trading volume was decent but the lowest in five trading days as investors await fresh cues from the President’s SONA later on Monday," he said.

Total trading volume on Monday thinned to $725.90 million from the $1.095 billion on Friday.

"For the rest of the week investors will train their attention to the turnover of power in the United Kingdom with Theresa May stepping down to make way for her replacement along with the fate of Brexit hanging in the balance," Mapa said.

Mapa said the market will also closely monitor developments in the Persian Gulf after a British-flagged tanker was boarded by the Iranian revolutionary guard.

"For now it’s all eyes on the President," he said. — RSJ, GMA News