Peso sinks to over eight-month low as dollar hits one-month high

The peso sank to an eight-month low against the greenback on Monday due to broad dollar strength and faster US producer inflation last month.

The local currency closed at PHP 56.78 versus the dollar on Monday, weakening by 46.5 centavos from Friday’s PHP 56.315 finish, data from the Bankers Association of the Philippines’ website showed.

This was the peso’s weakest close in over eight months or since its PHP 56.94-a-dollar finish on November 23, 2022.

The local unit opened Monday’s session at PHP 56.45 per dollar, which was also its intraday best. Its weakest showing for the day was at PHP 56.99 against the greenback.

Dollars traded went down to USD 1.41 billion on Monday from USD 1.43 billion on Friday.

The peso weakened following a stronger dollar recently, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar hit a one-month high against a basket of major currencies before steadying as investors sought a safe haven on concerns about China’s economy, Reuters reported.

The dollar index, which measures the buck against six major peers, rose to 103.02, its highest since early July. It was last little changed on the day at 102.88.

“The peso weakened anew as US inflationary concerns resurfaced following the latest uptick in US producer inflation report for July 2023,” a trader said in an e-mail.

US producer prices increased slightly more than expected in July as the cost of services rebounded at the fastest pace in nearly a year, but the trend remained consistent with a moderation in inflationary pressures, Reuters reported.

The producer price index (PPI) for final demand increased 0.3% last month. Data for June was revised lower to show the PPI was unchanged instead of nudging up by the previously reported 0.1%.

In the 12 months through July, the PPI increased 0.8% after gaining 0.2% in June.

For Tuesday, the trader said the peso could weaken further against the dollar ahead of a potentially strong US retail sales report.

The trader expects the peso to move between PHP 56.60 and PHP 56.85 per dollar on Tuesday, while Mr. Ricafort expects it to range from PHP 56.60 to PHP 56.90. — AMCS with Reuters