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Peso closes at P57.48 a dollar

Peso closes at P57.48 a dollar
BW FILE PHOTO

THE PESO weakened versus the dollar on Tuesday as market players expect the US Federal Reserve to remain aggressive in its meeting this week.

The local unit closed at a new all-time low of P57.48 against the greenback on Tuesday, losing eight centavos from its P57.40 finish on Monday, Bankers Association of the Philippines data showed.

Year to date, the peso has weakened by 12.7% or P6.48 from its P51-per-dollar close on Dec. 31, 2021.

The local unit opened Tuesday’s trading session at P57.40 versus the dollar. Its weakest showing was at P57.50, while its intraday best was at P57.355 against the greenback.

Dollars exchanged went up to $967 million on Tuesday from $508.4 million on Monday.

“The US dollar/peso exchange rate posted a new record high ahead of the widely expected large/jumbo Fed rate hike of 0.75-1.00 on Sep. 21, 2022,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

This would increase the allure of the dollar with higher interest rate income on dollar-denominated deposits, fixed-income investments and securities, Mr. Ricafort added.

“The peso weakened as rate differentials are expected to narrow due to stronger rate hike from the US Federal Reserve,” a trader said in an e-mail.

Investors have priced another 75-basis-point (bp) increase by the Federal Open Market Committee (FOMC) at its Sept. 20-21 policy meeting. Market players are also factoring in a full percentage point rate hike.

The Fed has raised benchmark rates by 225 bps since March as it seeks to rein in rising prices.

“The peso also weaker after the balance of payments (BoP) deficit data from January-August 2022 widened by more than 5 times compared to the same period last year,” Mr. Ricafort said.

For the eight months to August, the country’s BoP deficit widened to $5.492 billion from the $253 million seen in the same period in 2021, central bank data showed.

The Bangko Sentral ng Pilipinas (BSP) expects the country’s BoP position to end the year at an $8.4-billion deficit equivalent to -2% of gross domestic product amid weaker global demand. In 2021, the Philippines posted a BoP surplus of $1.345 billion.

This “may be largely brought about by the significantly wider trade deficits as imports have been bloated by elevated global commodity prices earlier this year largely attributed to the Russia-Ukraine war,” Mr. Ricafort added.

However, Mr. Ricafort said, lower global crude oil prices that led to the latest rollback in diesel prices may have been an offsetting factor for the peso today.

Brent crude futures for November settlement fell 7 cents or 0.1% to $91.93 a barrel by 0659 GMT.

US West Texas Intermediate crude for October delivery was at $85.60 a barrel, down 13 cents or 0.2%. The October contract will expire on Tuesday and the more active November contract was at $85.15, down 21 cents or 0.3%.

Back home, local oil companies implemented a per liter decrease in diesel by P4.15 and P4.45 for kerosene, effective Sept. 20.

“The local currency might continue to depreciate due to some caution ahead of the Fed decision early Thursday morning,” the trader said.

For Wednesday, Mr. Ricafort gave a forecast range of P57.35 to P57.55, while the trader expects the local unit to move from P57.40 to P57.60. — Keisha B. Ta-asan

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