THE PESO dropped to a three-week low against the greenback on Monday as US Federal Reserve officials said the central bank should discuss tapering its bond purchase program soon.
The local unit closed at P48.065 versus the dollar on Monday, dropping by 12 centavos from Friday’s finish of P47.945, data from the Bankers Association of the Philippines’ website showed.
This was the peso’s worst close since April 30’s finish of P48.10 per dollar.
The peso opened Monday’s session flat at P47.94 against the dollar, which was its intraday high. It dropped to as low as P48.085 versus the greenback.
Dollars traded went down to $937.64 million on Monday from $941.25 million on Friday.
The peso logged its weakest close in more than three weeks on Monday “after some Fed officials, such as Philadelphia Fed President Harker, signaled that the Fed should discuss reducing bond purchases sooner than later,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in a text message.
Federal Reserve officials should start talking about the best way to reduce their asset purchases “sooner rather than later,” Philadelphia Fed Bank President Patrick Harker said on Friday, Reuters reported.
The US central bank will communicate its plans for slowing its purchases of Treasury bonds and mortgage-backed securities well in advance of it happening, Mr. Harker said during a virtual conversation organized by the Washington Post.
The policy maker said unwinding the central bank’s asset purchases from the current pace of $120 billion a month would be the “first step” in removing the support the Fed is offering the economy. If the recovery continues to progress, officials would then look at raising interest rates at the “appropriate time.”
A “number” of Fed officials appeared ready to consider changes to monetary policy based on a continued strong economic recovery, according to minutes of the US central bank’s April meeting. But that view may have suffered a blow this month with the release of data showing job growth was anemic in April.
Mr. Ricafort added that weakness at the local stock market also affected the currency.
Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the peso’s “weakness may have come from a slightly improving local economic recovery sentiment with declines in virus infections and vaccination developments.”
“Initial volatility expectations in the market have been subdued, suggesting that investors are not pricing in a surprise from the US Fed in the coming months,” Mr. Asuncion added.
For Tuesday, Mr. Asuncion expects the peso to move between P47.90 and P48.20 versus the dollar, while RCBC’s Mr. Ricafort gave a forecast range of P48 to P48.12. — IBC with Reuters