Peso weakens against the dollar as market awaits Fed policy meeting

The peso depreciated against the dollar on Monday amid hawkish expectations ahead of the US Federal Reserve’s policy meeting this week.

The local unit closed at PHP 55.58 per dollar on Monday, weakening by five centavos from its PHP 55.53 finish on Friday, Bankers Association of the Philippines data showed.

The peso opened Monday’s session weaker at PHP 55.65 against the dollar. It dropped to as low as PHP 55.70, while its intraday best was at PHP 55.515 versus the greenback.

Dollars exchanged declined to USD 1.01 billion on Monday from USD 1.2 billion on Friday.

“The peso depreciated due to hawkish expectations prior to the US Federal Reserve policy meeting this week,” a trader said in an e-mail.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the Fed may adopt a hawkish tone following faster-than-expected US consumer and producer inflation last month.

The US central bank will meet to discuss policy on March 19-20.

The Fed held its target rate steady at the 5.25-5.5% range for a fourth straight time during its meeting in January. It raised borrowing costs by 525 basis points from March 2022 to July 2023.

The peso was also dragged down by a generally stronger dollar on Monday and higher global crude prices recently, Mr. Ricafort added.

For Tuesday, the trader said the peso could rebound against the dollar amid expectations of a rate hike by the Bank of Japan.

The trader sees the peso moving between PHP 55.45 and PHP 55.70 per dollar on Tuesday, while Mr. Ricafort expects it to range from PHP 55.50 to PHP 55.70. — A.M.C. Sy