Peso weakens vs dollar as market awaits Fed review
THE PESO depreciated against the dollar on Monday as the market turned cautious ahead of the US Federal Reserve’s policy meeting this week.
The local unit closed at P58.511 per dollar on Monday, weakening by 16.1 centavos from its P58.35 finish on Friday, Bankers Association of the Philippines data showed.
The peso opened Monday’s session weaker at P58.43 against the dollar. Its intraday best was at P58.36, while its worst showing was at P58.53 versus the greenback.
Dollars exchanged went down to $924.41 million on Monday from $1.29 billion on Friday.
Buyers were “on the tip” on Monday as the market awaited the Fed’s policy statement on Wednesday, a trader said by phone.
“The dollar-peso rate appreciated towards the close. We saw some buying interest from some players,” the trader added.
The Fed is widely expected to keep its target rate at the current 5.25%-5.5% range for the eighth straight time at their July 30-31 meeting.
After a benign June inflation report, markets are wagering that the Fed will lay the groundwork for a September rate cut at its policy meeting on Wednesday, Reuters reported.
Futures are fully priced for a quarter-point easing and even imply a 12% chance of 50 basis points (bps), and have 68 bps of easing priced in by December.
“The peso weakened amid the resurgence of domestic inflationary concerns from the impact of typhoon Carina,” a second trader said in an e-mail.
According to a bulletin from the Agriculture department, agricultural damage due to the typhoon and the southwest monsoon hit P696.87 million. Rice was the most affected crop, accounting for 81.81% of the damage.
Headline inflation eased to 3.7% in June, marking the seventh straight month that the consumer price index settled within the Bangko Sentral ng Pilipinas’ 2-4% annual target.
For Tuesday, the second trader said the peso could continue to depreciate “due to likely weaker Eurozone economic growth in the second quarter.”
The first trader sees the peso moving between P58.30 and P58.60 per dollar, while the second trader expects it to range from P58.25 to P58.50. — Luisa Maria Jacinta C. Jocson with Reuters