Peso softens on GDP data, latest Fed comments

The Philippine peso softened against its US counterpart on Thursday, taking into consideration the latest remarks of the US Federal Reserve and the release data which pointed to a continued slump of the local economy.

The local currency lost 3.5 centavos to close at P48.11:$1 versus Wednesday's finish of P48.075:$1.

Thursday's depreciation came as the US Fed kept the overnight interest and its monthly bond purchases unchanged in line with market expectations, as it pledged to keep support in place until a full economic rebound.

"Given the continued concerns around COVID and disappointingly slow rollout of the vaccine, the US economy is likely to lose momentum in the first quarter of the year," Seema Shah, chief strategist at Principal Global Investors in London, was quoted as saying in a Reuters report.

"Overnight, the dollar had already gained some steam as investors reacted to comments from Fed chair Powell suggesting that the US recovery had moderated. Meanwhile, PHP found no solace during trading hours as GDP slipped below market expectations, forcing investors to worry about the growth prospects of the local economy while foreign investors continued to dump local shares," Nicholas Antonio Mapa, senior economist at ING Bank Manila, said in a separate email exchange.

The Philippine Statistics Authority (PSA) earlier in the session reported the fourth-quarter 2020 gross domestic product (GDP) at -8.3%, bringing the full-year economic performance at -9.5%, the first full-year contraction since the Asian financial crisis in 1998 and the steepest decline on record.

Meanwhile, data from the local bourse showed that foreign funds bought P1.205 billion of shares during the session and sold P2.518 billion for a net selling position of P1.313 billion. — BM, GMA News