THE PESO depreciated against the dollar on Tuesday due to hawkish signals from a US Federal Reserve official and profit taking after the local currency strengthened to the PHP 55-per-dollar level on Monday.
The peso closed at PHP 56.115 per dollar on Tuesday, weakening by 20.5 centavos from its PHP 55.91 finish on Monday, based on Bankers Association of the Philippines data.
The peso opened Tuesday’s session weaker at PHP 56 against the dollar, which was also its intraday best. Its worst showing was at PHP 56.29.
Dollars exchanged rose to USD 1.62 billion on Tuesday from USD 1.15 billion on Monday.
The peso weakened on Tuesday due to hawkish signals from Minneapolis Fed President Neel Kashkari, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The hawkish rhetoric from Mr. Kashkari caused US Treasury yields to rise, which resulted in the dollar generally strengthening against other major currencies, Mr. Ricafort said.
Mr. Kashkari said on Monday that the US central bank likely has more work ahead of it to control inflation, Reuters reported.
“The economy has proved to be really resilient even though we’ve raised interest rates a lot over the past couple of years. That’s good news,” Mr. Kashkari said in an interview on the Fox News television channel.
But he added: “We haven’t completely solved the inflation problem. We still have more work ahead of us to get it done.”
Mr. Kashkari’s comments suggested he is still leaning toward raising interest rates again. The Fed met last week in a gathering that kept its overnight short-term interest rate target unchanged at between 5.25% and 5.5% and preserved the option to raise rates again as inflation is still well above its 2% target.
But with price pressures falling, many in markets believe the Fed is done with raising rates.
“The peso weakened driven by bargain-hunting after the local currency breached the PHP 56 level [on Monday],” a trader said in an e-mail.
For Wednesday, the trader said the peso could strengthen due to potentially dovish signals from Fed officials.
The trader and Mr. Ricafort expect the peso to range from PHP 56 to PHP 56.20 per dollar on Wednesday. — AMCS with Reuters
This article originally appeared on bworldonline.com