The peso weakened against the dollar on Wednesday on expectations of a rate hike from the US Federal Reserve overnight.
The local currency closed at PHP 54.62 versus the dollar on Wednesday, weakening by seven centavos from Tuesday’s PHP 54.55 finish, data from the Bankers Association of the Philippines’ website showed.
The local unit opened Wednesday’s session weaker at PHP 54.60 per dollar. Its weakest showing for the day was at PHP 54.69, while its intraday best was at PHP 54.56 against the greenback.
Dollars traded dropped to USD 987.1 million on Wednesday from the USD 1.1 billion seen on Tuesday.
The peso weakened on Wednesday due to expectations that the Fed will increase its key rate by 25 basis points (bps), Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.
“The peso weakened amid lingering hawkish policy expectations prior to the Federal Reserve policy meeting overnight,” a trader likewise said in a Viber message.
The Federal Reserve was expected to raise interest rates by a quarter of a percentage point on Wednesday, marking the 11th hike in the US central bank’s past 12 policy meetings and possibly a last move in its aggressive battle to tame inflation, Reuters reported.
The increase, anticipated by investors with nearly a 100% probability, would raise the benchmark overnight interest rate to the 5.25%-5.5% range.
The US central bank paused its tightening cycle last month after raising its key rate by a cumulative 500 bps to a range between 5% and 5.25%.
Mr. Ricafort added that higher global crude prices recently also dragged the peso down.
Oil prices rose to three-month highs on Tuesday, as signs of tighter supplies and pledges by Chinese authorities to shore up the world’s second-biggest economy lifted sentiment.
Brent futures settled up 90 cents at USD 83.64 a barrel after hitting USD 83.87 earlier, the highest since April 19. US West Texas Intermediate crude rose 89 cents to USD 79.63. The contract earlier rose to USD 79.90 a barrel, also the highest since April 19.
For Thursday, the trader said peso-dollar trading will be driven by potential policy signals from Fed Chair Jerome H. Powell after their meeting.
The trader sees the peso moving between PHP 54.45 and PHP 54.70 per dollar on Thursday, while Mr. Ricafort expects it to trade from PHP 54.50 to PHP 54.70. — AMCS with Reuters
This article originally appeared on bworldonline.com