THE PESO sank below the P54-per-dollar level on Monday, its weakest close in more than three years, on market worries over the economic impact of more rate hikes from the US Federal Reserve.
The local unit closed at P54.065 against the dollar, down by 31.5 centavos from its finish of P53.75 on Friday, based on data from the Bankers Association of the Philippines.
This is the first time the peso ended at the P54-per-dollar level since its P54.08 close on Oct. 15, 2018.
The peso opened Monday’s session stronger at P53.80 against the greenback, which was also its intraday best. Meanwhile, its weakest showing for the day was at P54.105.
Dollars exchanged increased to $1.015 billion on Monday from $962.5 million on Friday.
“The peso weakened significantly amid escalating global growth concerns from the impact of aggressive hawkish central bank policy actions,” a trader said in an e-mail.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso weakened on expectations of more rate hikes from the Fed after it fired off a 75-basis-point (bp) increase last week to arrest surging inflation.
US inflation was at 8.6% in May, the highest in over 40 years, driven mainly by higher prices of gasoline, food, and rent.
“The Fed signaled determination to further bring down US inflation back to the 2% target even if that would require more aggressive Fed rate hikes that could entail risk of economic slowdown or even recession just to bring down inflation,” Mr. Ricafort said.
The trader said the peso may weaken further on expectations of more hawkish comments from Fed officials this week. A whole chorus line of central bankers is on the speaking calendar this week, led by a likely hawkish testimony from Fed Chair Jerome H. Powell’s to the House on Wednesday and Thursday, Reuters reported.
The Fed last week vowed its commitment to containing inflation was “unconditional,” while Fed Governor Christopher Waller on Saturday said he would support another hike of 75 bps in July.
For Tuesday, Mr. Ricafort expects the local unit to move between P53.95 and P54.15 per dollar, while the trader expects the peso to move within P53.90 to P54.15. — T.J. Tomas with Reuters