Peso weakens versus dollar as investors await US inflation data

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THE PESO declined against the dollar on Thursday as markets await the release of October US consumer inflation data. — BW FILE PHOTO

THE PESO weakened against the dollar on Thursday on safe-haven demand as the market awaits the release of US inflation data, which could dictate the US Federal Reserve’s next move.

The local unit closed at P58.19 against the greenback on Thursday, weaker by 20 centavos from its P57.99-a-dollar finish on Wednesday.

The peso opened Thursday’s trading session weaker at P58.08 versus the dollar. Its weakest point for the day was at P58.25, while its intraday best was at P58 against the greenback.

Dollars traded on Thursday declined to $792 million from the $1.107 billion recorded on Wednesday.

“The peso weakened amid lingering market caution ahead of the US inflation report and US midterm election results,” a trader said in an e-mail.

The US Labor department was due to report October consumer price index (CPI) data overnight, which investors believe could provide clues on the pace of the Fed’s next policy move.

The Fed raised borrowing costs by 75 basis points (bps) for a fourth straight time earlier this month, bringing total increases since March to 375 bps.

The dollar inched higher ahead of the release of the CPI report. The greenback surged on Wednesday against its peers but later pared some of those gains as investors also priced in the results of the US midterm election.

The dollar index, which tracks the currency against major peers, was last up 0.11% to 110.48.

The greenback has lost some of its gains in the past weeks on hopes that the Fed would consider smaller rate hikes as early as its December meeting following dovish statements from policy makers.

Several Fed officials said the US central bank should be careful to not “over-tighten” to avoid tipping the world’s largest economy into a recession.

For his part, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso weakened despite the stronger-than-expected Philippine gross domestic product (GDP) in the third quarter.   

The Philippine economy expanded by 7.6% in the third quarter, faster than the revised 7.5% growth in the second quarter and the 7% in the same quarter a year ago, driven by household consumption and investment, as well as growth in the services and industry sectors.

The third-quarter print also beat the 6.1% median forecast in a BusinessWorld poll last week.

In the first nine months, GDP growth averaged 7.7%, above the government’s 6.5%-7.5% target for the year.

For Friday, Mr. Ricafort gave a forecast range of P58 to P58.30 per dollar, while the trader expects the local unit to move within the P58.10 to P58.30 band. — K.B. Ta-asan