Peso weakens as dollar climbs

The peso dropped on the first trading day of 2024 as remittance flows eased after the holidays and as the dollar gained versus major currencies.

The local unit closed at PHP 55.67 per dollar on Tuesday, weakening by 30 centavos from PHP 55.37 on Friday, based on Bankers Association of the Philippines data.

The market was closed on Monday for New Year’s Day.

The peso opened Tuesday’s session weaker at PHP 55.45 against the dollar. Its intraday best was at PHP 55.44, while its worst showing was its close of PHP 55.67 versus the greenback.

Dollars exchanged went down to USD 1.26 billion on Tuesday from USD 1.32 billion on Friday.  

The peso dropped against the dollar after remittances slowed as the holiday season ended, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The peso was also dragged down by a stronger dollar following a rise in global crude oil prices amid escalating tensions in the Red Sea, Mr. Ricafort added.

The dollar crept higher on the first trading day of the year as attention turned to economic data this week that may provide clues on the US Federal Reserve’s next moves, Reuters reported.

The dollar index, which measures the US currency against six rivals, fell 2% in 2023, snapping two years of gains. It was last at 101.44, up 0.059%, as investors weighed the prospect of the Fed cutting rates this year.

The dollar’s ascent weighed on the Japanese yen the most, with the Asian currency down by 0.35% at 141.36 per dollar, having slid 7% in 2023.

Markets are now pricing in an 86% chance of interest rate cuts from the Fed to start from March, according to CME FedWatch tool, with over 150 basis points of easing anticipated in the year.

Meanwhile, oil prices jumped on Tuesday, with Brent crude futures and US West Texas Intermediate crude futures each rising roughly 2%, due to potential supply disruptions in the Middle East after a naval clash in the Red Sea, among other things.

Brent gained USD 1.56 to USD 78.59 a barrel, while US crude rose USD 1.28 to USD 72.93.

“The peso depreciated on bargain hunting ahead of a likely uptick in the US manufacturing PMI (purchasing managers’ index) for December 2023,” a trader said in an e-mail.

For Wednesday, the trader said the peso could weaken further ahead of the release of US jobs data this week.

The trader sees the peso moving between PHP 55.55 and PHP 55.80 per dollar on Wednesday, while Mr. Ricafort expects it to range from PHP 55.55 to PHP 55.75. — A.M.C. Sy with Reuters