Currencies 2 MIN READ

Peso drops further vs dollar before Fed minutes release

February 22, 2023By BusinessWorld

THE PESO weakened against the dollar on Wednesday amid bets on the US Federal Reserve’s next policy move ahead of the release of the minutes of their meeting earlier this month.

The local currency closed at PHP 55.18 versus the greenback on Wednesday, declining by 9.5 centavos from Tuesday’s PHP 55.085 finish, Bankers Association of the Philippines data showed.

The peso opened Wednesday’s session at PHP 55.07 per dollar. Its intraday best was at PHP 55.05, while its weakest showing was at PHP 55.24 against the greenback.

Dollars traded fell to $1.006 billion on Wednesday from $1.035 billion on Tuesday.

“The peso weakened amid hawkish expectations ahead of the release of Fed policy minutes overnight,” a trader said in a Viber message.

Markets are awaiting hints about how high Fed policy makers expect interest rates to go from minutes of the US central bank’s Jan. 31 to Feb. 1 meeting, especially amid recent data showing stronger-than-expected US employment and consumer prices.

At that review, the US central bank hiked its target interest rate by 25 basis points (bps) to a range between 4.5% and 4.75%. This brought cumulative increases since March 2022 to 450 bps.

The Fed’s next policy meeting is on March 21-22.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the peso weakened after Russian President Vladimir Putin announced on Tuesday that Russia was suspending participation in the New START nuclear arms reduction treaty with the United States.

Signed by then-US President Barack Obama and his Russian counterpart Dmitry Medvedev in 2010, the New START treaty caps the number of strategic nuclear warheads that the United States and Russia can deploy.

The peso weakened against the dollar due to softer US existing home sales data, Mr. Ricafort added. The report from the National Association of Realtors on Tuesday showed a fall in home sales by 0.7% in January to a seasonally adjusted annual rate of 4 million units.

For Thursday, the trader said the peso may rebound against the dollar on the back of profit taking.

The trader expects the peso to move between PHP 55.05 and PHP 55.30 versus the greenback on Thursday, while Mr. Ricafort gave a forecast range of PHP 55.10 to PHP 55.30. — A.M.C. Sy

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