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Peso sinks ahead of Fed decision

JULIAN PAOLO DAYAG-UNSPLASH

THE PESO weakened versus the dollar on Wednesday on expectations of another aggressive rate hike from the US Federal Reserve.

The local unit closed at P58.47 against the dollar on Wednesday, down by 50 centavos from P57.97 on Friday, data from the Bankers Association of the Philippines’ website showed.

Philippine financial markets were closed for public holidays from Oct. 31 to Nov. 1.

The peso opened Monday’s session at P58.05 against the dollar. Its weakest showing was at P58.49, while its intraday best was at P58.02 versus the greenback.

Dollars exchanged went down to $844.15 million on Wednesday from $912.35 million on Friday.

“The peso depreciated due to market caution ahead of the US Federal Reserve policy decision this week,” a trader said in an e-mail.

“The US dollar also corrected higher recently vs. major global currencies to one-week highs … ahead of the widely expected jumbo rate hike of +0.75 on Nov. 2,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“Mostly stronger-than-expected US economic data since late last week… could still support further aggressive Fed rate hikes in the quest to significantly bring down elevated US inflation from 40-year highs recently,” Mr. Ricafort said.

The Fed is widely expected to raise benchmark rates by at least 75 basis points at its Nov. 1-2 meeting to temper soaring inflation. The decision was expected to be announced overnight.

“The peso backtracked ahead of the much-anticipated Fed meeting. With expectations for a hefty rate hike from [Fed Chair Jerome] Powell, risk assets took a backseat and slid. The market is now hopeful for some guidance for the so-called Fed pivot,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said on Wednesday.

For Thursday, the trader said the peso may strengthen ahead of a potentially weak US initial jobless claims report.

The trader sees the peso moving within P58.40 to P58.60 against the dollar on Thursday, while Mr. Ricafort gave a forecast range of P58.35 to P58.55. — Keisha B. Ta-asan

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