Peso slips on rate hike bets

THE PESO inched down against the dollar on Tuesday on lingering concerns over the pace of the US Federal Reserve’s policy tightening and surging coronavirus disease 2019 (COVID-19) cases in China.

The local unit ended trading at P57.375 versus the greenback, slipping by 1.5 centavos from its P57.36-to-a-dollar close on Monday, data from the Bankers Association of the Philippines showed.

The peso opened Tuesday’s session at P57.45 against the dollar. Its weakest showing was at P57.48, while its intraday best was at P57.32 against the greenback.

Dollars traded increased to $684.4 million on Tuesday from $527.82 million on Monday.

The peso inched lower after more policy signals from Fed officials, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

San Francisco Federal Reserve President Mary C. Daly said “there is more work to do” to get monetary policy in the right place to curb inflation, Reuters reported.

Ms. Daly also said she had yet to decide how many basis points (bps) she will support at the Fed’s December policy meeting, citing a need to wait for upcoming economic data.

Meanwhile, Cleveland Fed President Loretta J. Mester said the US central bank can opt for smaller increases starting next month.

“I think we can slow down from the 75 at the next meeting. I don’t have a problem with that, I do think that’s very appropriate,” Ms. Mester said in an interview with CNBC. “But I do think we’re going to have to let the economy tell us going forward what pace we have to be at,” she added.

Meanwhile, a trader said in an e-mail that the peso dropped due to “escalating global growth worries amid the rise in reported COVID-19 cases in China.”

Beijing closed parks, shopping malls, and museums on Tuesday, and Chinese cities resumed mass testing for the virus as the country reported 28,127 new cases on Monday.

For Wednesday, the trader said the peso may continue to weaken due to potentially hawkish remarks from more Fed officials.

The trader said the peso could move from P57.25 to P57.50 on Wednesday, while Mr. Ricafort gave a forecast range of P57.25 to P57.45 per dollar. — KBT with Reuters