Currencies 3 MIN READ

Peso drops further vs dollar on US jobs report

July 11, 2023By BusinessWorld

The peso weakened further against the dollar on Monday amid recession fears due to softer US labor data.

The local currency closed at PHP 55.69 versus the dollar on Monday, dropping by seven centavos from Friday’s PHP 55.62 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Monday’s session at PHP 55.55 per dollar. Its weakest showing was at PHP 55.72, while its intraday best was at PHP 55.53 against the greenback.

Dollars traded dropped to USD 748.65 million on Monday from the USD 1.01 billion seen on Friday.

“The peso weakened amid safe-haven demand after the slightly downbeat US labor report stoked recession concerns,” a trader said in an e-mail.

The local unit was dragged down by expectations of at least one more rate hike by the Fed this year due to the weaker labor data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

The US economy added the fewest jobs in 2-1/2 years in June, but persistently strong wage growth pointed to still-tight labor market conditions that most certainly ensure the Federal Reserve will resume raising interest rates later this month, Reuters reported.

Nonfarm payrolls increased by 209,000 jobs last month, the smallest gain since December 2020, the survey of establishments showed. Economists polled by Reuters had forecast payrolls rising 225,000. It was the first time in 15 months that payrolls missed expectations.

Job growth averaged 278,000 per month in the first half of the year. The economy needs to create 70,000-100,000 jobs per month to keep up with growth in the working-age population.

The US central bank paused its tightening cycle last month after hiking borrowing costs for 10 straight meetings by a total of 500 basis points, bringing the fed funds rate to a range between 5% and 5.25%.

Its next meeting is on July 25-26.

The dollar regained ground on Monday, partly recovering from a knee-jerk reaction to the jobs data.

The dollar index, which tracks the greenback against a basket of major peers, was up 0.15% at 102.44 having tumbled 0.87% on Friday.

The dollar rose as much as 0.55% against the Japanese yen and was last up 0.06% at 142.31 having slid nearly 1.3% on Friday.

For Tuesday, the trader said the peso could weaken further due to the potentially hawkish comments from Fed officials.

The trader sees the peso moving between PHP 55.50 and PHP 55.75 a dollar on Tuesday, while Mr. Ricafort sees it trading from PHP 55.60 to PHP 55.80. — A.M.C. Sy with Reuters

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