Peso weakens to 44.835

MANILA, Philippines - Muted global growth prospects caused the peso’s decline earlier yesterday, the Bangko Sentral ng Pilipinas said.

 “(This is because of) market forces reflecting negative market sentiment about the continuing weakness in global growth particularly in Europe and in Japan and the possible impact on global financial markets particularly in the US,” BSP Deputy Governor Diwa C. Guinigundo told reporters yesterday.

The peso almost touched the 45 per dollar band yesterday, trading between 44.80:$1 and 44.95:$1. However, it finished at 44.835:$1, barely unchanged from the 44.82:$1 closing on Tuesday.

The International Monetary Fund, in its latest World Economic Outlook, has cut its forecast for this year’s global output to 3.3 percent from a July projection of 3.2 percent. The Fund also lowered its 2015 global economic growth estimate to 3.8 percent from 3.6 percent.

Guinigundo said the BSP is not worried about the swings in the exchange rate as it remains watchful and ready to act against excessive volatilities.

He added the central bank does not act from observing just one or two days of large swings in the exchange rate, but rather from looking at the movement over a long period of time.

The depreciation of the local unit may continue as the US sees increasing capital flows, which in turn may cause the dollar to surge.

 “If both Europe and Japan will continue to be soft and capital flows will be in the direction of the US so what will happen is the US dollar will significantly appreciate,” Guinigundo said.