Peso weakens on hawkish Fed comments

THE PESO dropped versus the dollar on Monday amid hawkish signals from a US Federal Reserve official that dampened hopes of smaller rate hikes after US inflation slowed in October.

The local unit closed at P57.28 on Monday, losing five centavos from its P57.23 finish on Friday, Bankers Association of the Philippines data showed.

The peso opened Monday’s session at P57.30 versus the dollar. Its lowest showing for the day was at P57.39 against the greenback, while the peso’s intraday best was at P57.22.

Dollars traded declined to $720.63 million on Monday from $820.15 million on Friday.

“The peso depreciated after Fed official Waller dismissed market views of a policy shift from the US central bank following the better-than-expected US consumer inflation report,” a trader said in an e-mail.

Fed Governor Christopher J. Waller on Sunday said the US central bank may consider slowing down the pace of rate increases at its next meetings but needs more signs of improving inflation.

US inflation eased to 7.7% in October from the 8.2% print in September. Month on month, the consumer price index rose 0.4% after climbing by the same margin in September.

The Fed has raised rates by 375 basis points (bps) since March.

Even as the peso slightly depreciated on Monday, its close was still among the lowest in nearly two months, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Global crude oil prices still lingering among nine-month lows recently still partly supported sentiment on the peso and the rest of the local financial markets,” he added.

Brent crude futures were down 32 cents or 0.3% to $95.67 a barrel by 0725 GMT after settling up 1.1% on Friday, while US West Texas Intermediate crude futures fell 39 cents or 0.4% to $88.57 a barrel after closing 2.9% higher on Friday.

Mr. Ricafort said the stock market’s gains also boosted sentiment.

The benchmark Philippine Stock Exchange index gained 67.99 points or 1.08% to close at 6,354.76 on Monday, while the broader all shares index went up by 23.70 points or 0.71% to 3,352.59.

The trader said the peso may strengthen on Tuesday on the back of potentially weaker US producer inflation.

The trader gave a forecast range of P57.20 to P57.40 per dollar, while Mr. Ricafort said the peso could move from P57.15 to P57.35 on Tuesday. — KBT