December 5, 2023

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Peso may weaken as investors eye central bank moves

2 min read

THE PESO could depreciate this week on expectations of another rate hike by the US Federal Reserve despite slower consumer inflation in March and a pause in the Bangko Sentral ng Pilipinas’ (BSP) tightening cycle.

The local currency closed at P55.21 versus the greenback on Friday, climbing by five centavos from Thursday’s P55.26 finish, Bankers Association of the Philippines data showed.

However, week on week, the peso fell by 81 centavos from its P54.40 finish on April 5.

The peso opened Friday’s session at P55.22 per dollar. Its worst showing was at P55.27, while its intraday best was at P55.06 versus the greenback.

Dollars traded increased to $1.39 billion on Friday from the $1.198 billion recorded on Thursday.

The peso appreciated on Friday as mixed US data bolstered expectations of further Fed rate hikes, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A slew of mixed economic data including retail sales, industrial production and consumer sentiment cemented expectations that the Fed will hike rates another 25 basis points (bps) at next month’s policy meeting, Reuters reported.

Those expectations were underscored by Atlanta Fed President Raphael Bostic, who said another 25-bp hike could allow the Fed to end its tightening cycle, even as Chicago Fed President Austan Goolsbee called for the central bank to be prudent.

The Fed raised borrowing costs by 25 bps at its March 21-22 meeting, bringing its target interest rate to a range between 4.75% and 5%.

Since March 2022, it has hiked rates by a total of 475 bps.

The US central bank’s next meeting is on May 2-3.

In a report on Thursday, the US Labor department said its producer price index (PPI) for final demand dropped 0.5% in March, the most since April 2020, after being unchanged in February.

In the 12 months through March, the PPI increased 2.7%. That was the smallest year-on-year rise since January 2021 and followed a 4.9% advance in February.



2023-04-16 09:00:23

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