The peso weakened against the dollar on Thursday after the US Federal Reserve signaled its tightening cycle is far from over.
It closed at PHP 55.945, down by half-a-centavo from Wednesday’s PHP 55.94 finish, data from the Bankers Association of the Philippines website showed.
The currency opened at PHP 56 a dollar, weakened to as much as P56.10 and strengthened to as much as PHP 55.945.
Dollars traded fell to USD 729.5 million from USD 881.9 million a day earlier.
“The peso weakened after Fed Chairman Jerome H. Powell noted that US policy rates might remain elevated for a couple of years, defying market expectations of a possible rate cut later this year,” a trader said in an e-mail.
The peso was also dragged down by recovering global crude oil prices, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.
Oil prices stabilized on Thursday after a plunge on Wednesday, as the market balanced a jump in refinery runs at the world’s top crude importer China with a weak economic backdrop, according to Reuters.
Brent crude futures were up by 0.04% or 3 cents to USD 73.23 a barrel at 9:03 a.m. GMT. US West Texas Intermediate (WTI) crude rose by 0.01% or a cent to $68.28 a barrel.
Both benchmarks fell by 1.5% on Wednesday.
The Federal Reserve kept interest rates unchanged on Wednesday but signaled in new projections that borrowing costs might still need to rise by as much as half-a-percentage point by the end of the year, as the US central bank reacted to a stronger-than-expected economy and a slower decline in inflation, Reuters reported.
The Federal Open Market Committee paused its aggressive tightening campaign after hiking policy rates 10 times straight. It has raised borrowing costs by 500 basis points (bp) to 5-5.25%.
But at a press briefing at the end of the US central bank’s policy meeting, Mr. Powell signaled there might be two more 25-bp rate increases this year as US inflation remains sticky, and the economy is still robust.
The trader expects the peso to appreciate on Friday due to a potentially weaker US retail sales report.
The trader expects the peso to move between PHP 55.85 and PHP 56.05 a dollar, while Mr. Ricafort gave a forecast of PHP 55.85 to PHP 55.95. — Aaron Michael C. Sy
This article originally appeared on bworldonline.com