Peso climbs as dollar slips from three-month high

THE PESO rebounded on Thursday as the dollar inched lower, despite the release of strong US data that affirmed expectations of a hawkish US Federal Reserve.

The local currency closed at PHP 55.24 versus the greenback on Thursday, rising by eight centavos from Wednesday’s PHP 55.32 finish, data from the Bankers Association of the Philippines’ website showed.

The peso opened Thursday’s trading session at PHP 55.25 per dollar. Its intraday best stood at PHP 55.14, while its worst showing was at PHP 55.29 against the greenback.

Dollars traded went down to USD 926.3 million on Thursday from the USD 1.022 billion recorded on Wednesday.

The peso mostly traded sideways during the session and corrected along with the dollar index, a trader said in a Viber message.

“The dollar-peso exchange rate also corrected slightly lower after the gauge of the dollar versus major global currencies corrected slightly lower from new three-month highs recently,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Federal Reserve Chair Jerome Powell, who earlier signaled the possibility of more Fed rate hikes and higher Fed rate peak if elevated inflation persists, stressed that no decision has been made on the size of the Fed rate hike in March 2023,” he added.

The dollar held near a three-month high on Thursday, underpinned by Mr. Powell’s message that interest rates would have to go higher and possibly faster, Reuters reported.

In the second day of his testimony to Congress on Wednesday, Mr. Powell reaffirmed his message, though he struck a cautious note, saying debate on the scale and path of future rate hikes was still underway and would depend on data.

That caused the dollar to pause its sharp rally from earlier in the week, retreating from close to a three-month top against the yen. It was down 0.6% at 136.55 yen.

The dollar index edged 0.05% lower to 105.57 and remained near a three-month peak of 105.88 hit on Wednesday.

In the United States, data released overnight painted a picture of a sturdy economy, doing little to assuage fears the Fed will ease up on its relentless rate hikes.

Job openings remain elevated, private payrolls beat consensus estimates and demand for home loans increased despite higher mortgage rates.

Fed funds futures now imply a nearly 70% chance the Fed will raise rates by 50 basis points (bps) this month, up from just about 9% a month ago.

The Fed hiked its target interest rate by 25 bps at its Jan. 31 to Feb. 1 meeting to a range between 4.5% and 4.75%.

Since March 2022, the US central bank has raised rates by a total of 450 bps. Its next policy meeting is on March 21-22.

“The peso is still relatively stable at familiar ranges recently after the recent signals from local monetary authorities that they are ready to use tools available in the policy toolkit to help stabilize inflation… as this could also support more comfortable interest rate differentials that somewhat support the peso,” RCBC’s Mr. Ricafort added.

The Bangko Sentral ng Pilipinas will hold its own policy meeting on March 23. It has hiked borrowing costs by 400 bps since May 2022, with its key rate now at 6%, to fight rising inflation.

For Friday, the trader expects the peso to trade between PHP 55 and PHP 55.50 per dollar, while Mr. Ricafort gave a forecast range of PHP 55.20 to PHP 55.40. — AMCS with Reuters