The peso weakened to a two-month low against the dollar on Tuesday due to hawkish remarks from a US Federal Reserve official.
The local currency closed at PHP 56.24 versus the dollar on Tuesday, weakening by 22 centavos from Monday’s PHP 56.02 finish, data from the Bankers Association of the Philippines’ website showed.
This was the peso’s weakest close in over two months or since its PHP 56.26-per-dollar close on June 1.
The local unit opened Tuesday’s session weaker at PHP 56.18 per dollar. Its intraday best was at PHP 56.14, while its weakest showing of the day was at PHP 56.38 against the greenback.
Dollars traded rose to USD 1.15 billion on Tuesday from the USD 973.75 million seen on Monday.
“The peso weakened anew after Fed official Bowman commented the need for further US policy rate hikes,” a trader said in an e-mail.
Additional interest rate hikes will likely be needed in order to lower inflation to the US Federal Reserve’s 2% target, Fed Governor Michelle Bowman said on Monday, Reuters reported.
Ms. Bowman, in remarks prepared for delivery to a “Fed Listens” event in Atlanta that largely repeated comments she made to a banking group on Saturday, said she backed the latest interest rate increase last month because inflation remains too elevated, and job growth and other indications of activity show the economy has continued expanding at a “moderate pace.”
The Fed raised borrowing costs by 25 basis points (bps) last week, bringing its target interest rate to a range between 5.25% and 5.5%.
The US central bank has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.
The Federal Open Market Committee will hold its next policy meeting on Sept. 19-20.
The peso was also dragged down by a stronger dollar, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The dollar index rose by 0.3% to 102.36, edging away from Friday’s one-week low in the wake of a mixed US jobs report which pointed to a cooling, but still resilient labor market.
For Wednesday, the trader said the peso could depreciate further due to market caution ahead of the release of Philippine second quarter gross domestic product data on Thursday.
Both the trader and Mr. Ricafort see the peso moving between PHP 56.10 and PHP 56.30 per dollar on Wednesday. — AMCS with Reuters