Peso sinks further vs dollar on Fed worries

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THE PESO declined further against the dollar on Wednesday on lingering worries over aggressive US Federal Reserve hikes. — BW FILE PHOTO

THE PESO retreated further versus the greenback on Wednesday after hawkish signals from US Federal Reserve officials and rising tensions between the United States and China.

The local unit closed at P55.74 per dollar on Wednesday, depreciating by 30.5 centavos from its P55.435 finish on Tuesday, based on data from the Bankers Association of the Philippines.

The peso opened Wednesday’s session at P55.55 versus the dollar, which was also its intraday best. Its weakest showing for the day was at P55.777 against the greenback.

Dollars exchanged rose to $922.1 million on Wednesday from $777.17 million on Tuesday.

“The peso exchange again weaker for the third straight day… but still near one-month lows nevertheless, after the healthy upward correction of the US dollar versus major global currencies and also the healthy upward correction of US Treasury yields, amid hawkish signals from Fed officials on the need to continue fighting elevated inflation,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The peso weakened after various Fed officials dismissed views that the rate hikes by the US central bank might be nearing its end,” a trader said.

San Francisco Fed President Mary Daly, Cleveland Fed President Loretta Mester and Chicago Fed President Charles Evans said separately on Tuesday that they will continue to support hikes to curb US inflation, which hit another 40-year high in June.

The Fed raised rates by 75 basis points (bps) for the second straight meeting in July. It has hiked borrowing costs by 225 bps since March.

The peso also declined due to geopolitical risks after US House Speaker Nancy Pelosi visited Taiwan, causing China to announce missile tests and drills in the area, Mr. Ricafort said.

“The local currency might continue to depreciate as the escalating geopolitical risks between US and China might drive renewed safe-haven demand for the greenback,” the first trader added.

For Thursday, the first trader sees the peso moving from P55.65 to P55.85 per dollar, while Mr. Ricafort expects a P55.60 to P55.80 range. Meanwhile, a second trader gave a wider trading band of P55.60 to P55.90. — K.B. Ta-asan