Peso weakens to P56:$1 level
THE PESO returned to the P56-per-dollar level on Thursday amid expectations of a mild recession in the United States and a pause in the US Federal Reserve’s tightening cycle.
The local currency closed at P56.065 versus the dollar on Thursday, depreciating by 29.50 centavos from Wednesday’s P55.77 finish, data from the Bankers Association of the Philippines’ website showed.
The local unit opened Thursday’s session slightly weaker at P55.79 per dollar. Its worst showing for the day was at P56.11, while its intraday best was at P55.74 versus the greenback.
Dollars traded surged to $1.64 billion on Thursday from the $890.3 million recorded on Wednesday.
The peso fell to the P56 level on Thursday as minutes of the latest Fed meeting showed officials supported a more data-dependent approach, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.
“The peso weakened from market worries after the latest Fed minutes hinted that US central bank officials are expecting a mild US recession this year,” a trader said in an e-mail.
Fed officials “generally agreed” last month that the need for further interest rate increases “had become less certain,” with several saying that the quarter-percentage-point hike they approved might be the last, according to minutes of the May 2-3 meeting released on Wednesday, Reuters reported.
Others cautioned the US central bank needed to keep its options open given the risks of persistent inflation, which is still running at more than two times the Fed’s 2% target.
With Fed staff continuing to project a mild recession later this year, some policy makers “saw evidence that the past year’s tightening was beginning to have its intended impact,” with “almost all participants” seeing risks to economic growth due to a tightening of bank credit after a string of bank failures.
The US central bank has raised rates by 500 basis points since March 2022, bringing the fed funds rate to 5%-5.25%.
Its next meeting is on June 13-14.
Mr. Ricafort added that safe-haven demand for the dollar also put pressure on the peso.
The dollar index, which tracks the US currency against six major peers, earlier hit 103.91, its highest since March 20. The index last rose 0.319% at 103.86.
For Friday, the trader expects the peso to move from P55.90 to P56.15 per dollar, while Mr. Ricafort sees it trading between P55.95 and P56.15. — AMCSwith Reuters