Peso declines on Fed worries
THE PESO ended weaker against the dollar on Monday following hawkish signals from the US central bank, and as renewed coronavirus worries spurred safe-haven demand.
The local unit closed at P57.36 versus the dollar on Monday, down by 10 centavos from its P57.26 finish on Friday, data from the Bankers Association of the Philippines’ website showed.
The peso opened Monday’s session stronger than its Friday close at P57.20, which was also its intraday best. Its weakest point was at P57.37 versus the greenback.
Dollars exchanged went down to $527.82 million on Monday from $650.18 million on Friday.
The peso weakened on Monday as officials of the US Federal Reserve said they will likely continue hiking rates, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Last week, Federal Reserve Bank of Boston President Susan M. Collins said the Fed may need to hike by another 75 basis points (bps) as it seeks to control inflation.
St. Louis Fed President James B. Bullard also said the Fed needs to keep on raising borrowing costs as its monetary tightening so far “had only limited effects on observed inflation.”
The US central bank has raised borrowing costs by 375 bps since March, with the latest move being a fourth straight 75-bp rate hike earlier this month, bringing the fed funds rate a 3.75-4% range.
Meanwhile, a trader attributed the peso’s depreciation to rising coronavirus disease 2019 (COVID-19) cases in China.
“The peso weakened from global growth concerns after China recorded new COVID-related deaths and surge in COVID cases over the weekend,” the trader said in an e-mail.
Reuters reported that students in schools across several Beijing districts buckled down for online classes on Monday after officials called for residents to stay home, as COVID-19 cases were higher in China.
China recorded 26,824 new local cases for Sunday, nearing the country’s daily pandemic peak in April. Two deaths were also reported in Beijing, up from one on Saturday, which was China’s first since late May.
For Tuesday, the trader said the peso may continue to weaken after China’s central bank flagged growth worries.
The trader said the peso could move from P57.25 to P57.50 on Tuesday, while Mr. Ricafort gave a forecast range of P57.20 to P57.40 per dollar. —KBT with Reuters