Peso hits one-month low as dollar rises

The peso weakened to a more than one-month low against the dollar on Tuesday as the greenback gained strength, supported by a weaker euro and investor anxieties over the UK fiscal position.

It closed at PHP 57.51 a dollar, down 35 centavos from PHP 57.16 on Monday, based on Bankers Association of the Philippines data posted on its website. This was its weakest close since Aug. 1, when it ended at PHP 58.145 a dollar.

The peso opened the session at PHP 57.22. It hit an intraday best of PHP 57.14 and touched a low of PHP 57.54 before settling at its close. Dollar turnover rose to USD 1.92 billion, sharply higher than USD 1.06 billion the previous day.

A trader said the peso tracked the dollar’s late-session gains, which came after the euro opened weaker following a spike in the UK’s long-term borrowing costs. Britain’s 30-year government bond yield climbed to its highest level since 1998, fueling worries over its fiscal position.

Sterling and the Japanese yen also slumped on Tuesday amid mounting concern about government finances, allowing the dollar to regain ground after five days of selling, Reuters reported.

Renewed pressure on global bond markets spilled into currencies, with gold prices simultaneously hitting record highs. Sterling fell 1.1% to $1.1396, its weakest level since Aug. 22, while the dollar rose 1% to 148.64 yen. The euro gained against both sterling and the yen, up 0.5% and 0.3%, respectively.

“Capital markets across equities and credit are still optimistic on the US, which suggests that foreign holders of US assets are not in retreat,” analysts from DBS wrote in a client note.

Traders have sold the greenback as US President Donald J. Trump’s attacks on the Federal Reserve, including his decision to remove Governor Lisa Cook, raise fear that the White House is undermining the central bank’s independence at a time when the case to begin cutting interest rates is far from clear.

“The Fed could be ominously poised to start its rate-cutting cycle,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “People see the attraction of being in gold.”

At home, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso’s decline was also partly driven by continued weakness in local equities as net foreign selling persisted.

The Philippine Stock Exchange index (PSEi) slipped 0.18% or 11.46 points to close at 6,128.89, while the broader all-share index shed 0.06% or 2.52 points to 3,681.03.

The trader expects the peso to move within PHP 57.20 to PHP 57.70 against the dollar on Wednesday, while Mr. Ricafort expects a narrower band of PHP 57.40 to PHP 57.65. — Aaron Michael C. Sy