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Peso ends at record low vs dollar on hawkish Fed comments

THE PESO on Monday ended at its record low against the dollar for the fourth time this month amid hawkish comments from US monetary policy makers. — BW FILE PHOTO

THE PESO on Monday closed at its record low versus the dollar for the fourth time this month after US Federal Reserve officials said the US central bank may hike rates by 75 basis points (bps) at its remaining meetings to curb rising inflation.

The local unit closed at its record low of P59 versus the greenback on Monday, declining by 6.5 centavos from its P58.935 finish on Friday, Bankers Association of the Philippines data showed. This all-time low close was first logged on Oct. 3 and then on Oct. 10 and Oct. 13.

The peso opened Monday’s session at P58.97 against the dollar. Its weakest showing was at its finish of P59, while its intraday best was at P58.92 versus the greenback.

Dollars exchanged decreased to $524.9 million on Monday from $542.8 million on Friday.

“The peso weakened anew after Fed official Bullard hinted at a 75-bp US rate hike in December, stronger than the market consensus of a 50-bp move,” a trader said in an e-mail.

St. Louis Fed President James B. Bullard said on Friday in a Reuters interview that a faster-than-expected US inflation may warrant continued “front-loading” through 75-bp rate hikes at its Nov. 1-2 and Dec. 13-14 meetings.

If the Fed follows through with two more 75-bp hikes this year, its policy rate would end 2022 at a range of 4.50%-4.75%. The Fed has raised borrowing costs by 300 bps since March.

Hawkish statements from other Fed officials last week also caused the peso to decline, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

San Francisco Federal Reserve President Mary C. Daly on Wednesday reiterated the US central bank’s commitment to curbing inflation with more rate increases.

Meanwhile, Federal Reserve Bank of Cleveland President Loretta J. Mester said the Fed will need to continue raising rates and keep them high from some time to rein in inflation.

On the other hand, Kansas City Fed President Esther George said on Friday that the US central bank should tighten slowly and steadily allow time for its policy actions to make their way through the economy and minimize market volatility.

During the Fed’s Sept. 20-21 monetary policy meeting, a number of officials “emphasized the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action.”

Fed officials said it is important to stay the course in fighting inflation “even as the labor market slowed.”

For Tuesday, the trader said the peso might strengthen on potentially upbeat China gross domestic product growth.

The trader expects the local unit to move between P58.80 and P59 versus the dollar, while Mr. Ricafort gave a forecast range of P58.85 to P59. — Keisha B. Ta-asan

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