Currencies 3 MIN READ

Peso weakens ahead of key US economic data

February 21, 2023By BusinessWorld

THE PESO weakened against the greenback on Tuesday due to the dollar’s strength ahead of key US data and geopolitical concerns.

The local currency closed at PHP 55.085 versus the greenback on Tuesday, declining by 13.5 centavos from Monday’s PHP 54.95 finish, Bankers Association of the Philippines data showed.

The peso opened Tuesday’s trading session slightly stronger at P54.94 per dollar. Its intraday best was at PHP 54.91, while its weakest showing was at PHP 55.10 against the greenback.

Dollars traded rose to USD 1.035 billion on Tuesday from USD 717.4 million on Monday.

“The peso depreciated amid geopolitical concerns on the Russia-Ukraine conflict after US President Biden made a surprise visit to Kyiv,” a trader said in an e-mail.

US President Joseph R. Biden on Monday made a surprise visit to Kyiv to send a message of “enduring support” for Ukraine and announce further military aid for the army of Ukrainian President Volodymyr Zelensky, Reuters reported.

The State department announced a further USD 460 million in US aid to Ukraine, including USD 450 million worth of artillery ammunition, anti-armor systems and air defense radars, and USD 10 million for energy infrastructure.

The dollar’s strength against other major currencies also dragged down the local unit, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar hovered around its highest in six weeks, ahead of data this week that could offer direction on future interest rates, Reuters reported.

Strong US labor data and sticky inflation have raised US rate expectations and supported the dollar’s rally this month, and Tuesday’s European and US manufacturing data and Friday’s core personal consumption expenditures price index will guide the US Federal Reserve’s next steps.

After a quiet Monday during the Presidents’ Day holiday in the United States, the dollar stood at 134.65 yen, up 0.3% and was up 0.2% against the euro at USD 1.0665.

The US dollar index is on track for a fourth week of gains and is up about 1.7% through February so far, but has steadied around 104, down from a six-week high of 104.67 hit on Friday.

The US central bank hiked its fed funds rate by 25 basis points (bps) to a range between 4.5% and 4.75% at its Jan. 31 to Feb. 1 meeting. This brought cumulative increases since March 2022 to 450 bps.

The Fed’s next policy review is on March 21-22.

The peso might continue to weaken moving forward as the market awaits the release of the minutes of the Fed’s policy meeting on Wednesday, the trader said.

The trader sees the peso moving from PHP 55 to PHP 55.25 on Wednesday, while Mr. Ricafort expects it to trade between PHP 54.95 and PHP 55.15 per dollar. — A.M.C. Sy with Reuters


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