The peso weakened against the dollar on Wednesday ahead of potentially hawkish remarks from US Federal Reserve Chair Jerome H. Powell’s testimony to the Congress.
The local currency closed at PHP 55.645 versus the dollar on Wednesday, down by 12.50 centavos from Tuesday’s PHP 55.52 finish, data from the Bankers Association of the Philippines’ website showed.
The local unit opened Wednesday’s session at PHP 55.62 per dollar. Its weakest showing was at PHP 55.68, while its intraday best was at PHP 55.57 against the greenback.
Dollars traded fell to USD 1.01 billion on Wednesday from the USD 1.21 billion seen on Tuesday.
The peso dropped due to potentially hawkish signals from Mr. Powell’s semi-annual testimony on monetary policy at the US House Financial Services Committee and then at the US Senate Banking Committee, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Mr. Ricafort added that a stronger dollar and higher global crude oil prices also dragged the peso down.
“The peso weakened due to market caution prior to Fed Chair Powell’s testimony to the US House of Representatives,” a trader likewise said in an e-mail.
The dollar was firmer on Wednesday leading into Mr. Powell’s appearance before Congress where he is expected to strike a hawkish tone, Reuters reported.
The US dollar index was marginally firmer at 102.60.
Mr. Powell faces lawmakers in two days of testimony and is sure to be questioned on whether rates will really rise again in July and peak in a 5.5%-5.75% range as projected.
Markets have their doubts and currently imply around a 78% chance of a hike to 5.25-5.5% next month, with that likely being the end of the entire tightening cycle.
The Fed last week kept its target interest rate unchanged at 5-5.25% but signaled in new projections that borrowing costs may still need to rise by as much as half of a percentage point by the end of this year, as the US central bank reacted to a stronger-than-expected economy and a slower decline in inflation.
In a press conference at the end of the central bank’s latest policy meeting last week, Mr. Powell described US growth and the job market as holding up better than expected under the weight of the aggressive monetary policy tightening of the past year — likely lengthening the Fed’s fight to lower inflation but also letting it proceed with less economic damage.
The pause was out of caution, Mr. Powell said, to allow the Fed to gather more information before determining if rates do need to rise again, with the pace of its moves now less important than finding a proper endpoint that slows price increases while minimizing any rise in unemployment.
Meanwhile, Brent futures firmed 23 cents to USD 76.13 a barrel and US West Texas Intermediate crude futures inched up 26 cents to USD 71.45 a barrel as of 0611 GMT.
For Thursday, the trader said the peso could weaken further on potentially hawkish remarks from Mr. Powell overnight.
The trader sees the peso moving between P55.55 and P55.80 per dollar on Thursday, while Mr. Ricafort sees it trading from P55.55 to P55.75. — A.M.C. Sy with Reuters
This article originally appeared on bworldonline.com