THE PESO appreciated on Tuesday as the dollar was weighed down by US debt ceiling concerns and bets of a rate hike pause by the US Federal Reserve at its next meeting.
The local currency closed at PHP 56.03 versus the dollar on Tuesday, inching up by four centavos from Monday’s PHP 56.07 finish, data from the Bankers Association of the Philippines’ website showed.
The local unit opened Tuesday’s session stronger at PHP 55.97 per dollar, which was also its intraday best. Its worst showing for the day was at PHP 56.222 versus the greenback.
Dollars traded went up to USD 1.295 billion on Tuesday from the $1.28 billion recorded on Monday.
The local currency appreciated after the dollar dropped amid bets of a pause in the Fed’s tightening cycle, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The peso appreciated as the greenback waned after US House Speaker McCarthy noted lack of substantial progress in the US debt ceiling negotiations,” a trader added in an e-mail.
The dollar index fell 0.029%, with the Japanese yen strengthening 0.10% versus the US currency at 135.98 per dollar, Reuters reported.
On Monday, several Fed officials indicated they expect interest rates to stay high, at odds with market expectations for a rate cut before the end of the year.
In addition, Richmond Federal Reserve President Thomas Barkin said in an interview with Reuters that he is not yet convinced inflation is on a steady path downward, although he is comfortable with the Fed using a data-dependent approach for additional rate hikes.
Fed Chair Jerome H. Powell is scheduled to speak on Friday and investors will monitor his comments for any signals on the path of interest rates this year.
The US central bank has hiked borrowing costs by 500 basis points since March 2022, bringing the fed funds rate to 5% to 5.25%.
Its next meeting is on June 13-14.
Meanwhile, US President Joseph R. Biden, Jr. and Republican House of Representatives Speaker Kevin McCarthy on Monday prepared for critical debt-ceiling talks, with a little more than two weeks to go before the US government could run short of money to pay its bills.
The White House has not ruled out the annual spending caps that Republicans say must accompany any increase in the nation’s USD 31.4-trillion debt limit.
For Wednesday, the trader said the peso could weaken anew amid Fed officials’ speaking engagements scheduled overnight.
The trader sees the peso moving between PHP 55.90 and PHP 56.15 per dollar on Wednesday, while Mr. Ricafort sees it trading from PHP 55.90 to PHP 56.10. — By AMCS with Reuters
This article originally appeared on bworldonline.com