Peso drops on hawkish remarks from US Federal Reserve chair

THE PESO weakened against the dollar on Wednesday due to hawkish remarks from US Federal Reserve Chair Jerome H. Powell.

The local currency closed at P55.32 versus the greenback on Wednesday, down by 32 centavos from Tuesday’s P55 finish, data from the Bankers Association of the Philippines’ website showed.

The peso opened Wednesday’s trading session at P55.30 per dollar. It traded weaker the entire session, with its intraday best was at P55.24 and its worst showing at P55.48 against the greenback.

Dollars traded went up to $1.022 billion on Wednesday from the $896.8 million recorded on Tuesday.

The peso dropped due to a stronger dollar after hawkish signals from the Fed chief, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The peso weakened along with regional currencies. The dollar was strong across given Powell’s hawkish comments,” a trader likewise said in a Viber message.

The dollar index rose to as high as 105.65, up 1.3% on the day and the highest since Dec. 6, Reuters reported.

The dollar hit a three-month high after Mr. Powell said to lawmakers that the US central bank is likely to raise rates more than previously expected and warned that the process of getting inflation back to 2% has “a long way to go.”

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” the US central bank chief said in his semi-annual testimony before the Senate Banking Committee.

“If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Mr. Powell said.

The Fed hiked its target interest rate by 25 bps at its Jan. 31 to Feb. 1 meeting to a range between 4.5% and 4.75%.

Since March 2022, the US central bank has raised rates by a total of 450 bps. Its next policy meeting is on March 21-22.

For Thursday, the trader expects the peso to trade between P55 and P55.50 per dollar, while Mr. Ricafort gave a forecast range of P55.25 to P55.45. — A.M.C. Sy with Reuters