The peso slumped to a near one-month low against the dollar on Monday as strong US jobs data tempered expectations of an early rate cut by the US Federal Reserve.
The local unit closed at PHP 55.65 per dollar on Monday, weakening by 35 centavos from PHP 55.30 on Thursday, based on Bankers Association of the Philippines data.
This is the peso’s worst finish in almost a month or since it closed at PHP 55.67 per dollar on Nov. 17.
The peso opened Monday’s session weaker at PHP 55.57 against the dollar. Its intraday best was at PHP 55.53, while its worst showing was at PHP 55.665 versus the greenback.
Dollars exchanged fell to USD 888.88 million on Monday from USD 1.21 billion on Thursday.
The peso dropped on Monday as the dollar strengthened amid weakening bets of a rate cut by the US central bank in early 2024 following the release of latest nonfarm payrolls data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“As a result, some profit-taking was also seen in global financial markets, such as the upward correction in US Treasury yields, global crude oil prices, and a slight downward correction in the local stock markets to new one-week lows,” he added.
“The peso depreciated significantly after the stronger-than-expected US employment report tempered views of an early Fed rate cut next year,” a trader likewise said in an e-mail.
US job growth accelerated in November while the unemployment rate fell to 3.7%, signs of underlying labor market strength that suggested financial market expectations of an interest rate cut early next year were probably premature, Reuters reported.
The Labor department’s closely watched employment report on Friday, however, did not change views that the Federal Reserve’s rate-hiking cycle was complete as annual wages rose moderately last month. Inflation has been cooling in recent months.
The drop in the jobless rate from a nearly two-year high of 3.9% in October alleviated fears that the economy was close to tipping into recession. The US central bank is expected to keep rates unchanged next Wednesday.
Nonfarm payrolls increased by 199,000 jobs last month after rising by an unrevised 150,000 in October, the Labor department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast 180,000 jobs created.
Financial markets lowered their bets of a rate cut in March. Traders saw higher odds of cut in May. Most economists continued to believe that the Fed would start easing monetary policy in the second half of 2024 as inflation subsides.
The Fed kept its target rate steady at the 5.25%-5.5% range for a second straight time during its Oct. 31-Nov. 1 meeting.
It has hiked rates by a cumulative 525 basis points since it began its tightening cycle in March 2022.
For Tuesday, the trader said the peso could recover against the dollar amid expectations of a good November US consumer price index report to be released later that day.
The trader sees the peso moving between PHP 55.50 and PHP 55.75 per dollar, while Mr. Ricafort expects it to range from PHP 55.55 to PHP 55.75. — AMCS with Reuters