Home Banking & Finance Peso at weakest in over a year

Peso at weakest in over a year

THIS is the local currency’s weakest close since it finished trading at P51.07 a dollar on March 26, 2020. — BW FILE PHOTO

THE PESO sank to its weakest versus the greenback in more than a year, as investors flocked to the safe-haven dollar due to concerns on the upcoming tapering of asset purchases by the US Federal Reserve as well as higher oil prices.

The local unit closed at P51 per dollar on Monday, weaker by 35 centavos from its P50.65 finish on Friday, based on data from the Bankers Association of the Philippines.

This is the peso’s weakest close since it finished trading at P51.07 a dollar on March 26, 2020, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The peso opened Monday’s session at P50.72 per dollar, which was also its intraday best. Meanwhile, its weakest showing was at its close of P51 versus the greenback.

Dollars traded inched up to $1.261 billion on Monday from $1.185 billion on Friday.

A trader said market participants remained cautious and opted for the safe-haven dollar after US central bank officials hinted on the upcoming reduction of asset purchases.

“Fed officials continue to communicate the case for an asset purchase taper which is expected to be implemented later this year,” the trader said in an e-mail.

Cleveland Fed President Loretta Mester and Kansas City Fed President Esther George on Friday separately said the US economy had shown substantial progress towards reaching maximum employment and its 2% inflation goals, Reuters reported. Both metrics have been gauged by the Fed to assess when it could start reducing its $120-billion monthly asset purchases.

Ms. Mester said she supports beginning the tapering of asset purchases in November and concluding it over the first half of 2022. Meanwhile, Ms. George said “the rationale for continuing to add to our asset holdings each month has waned.”

Peso-dollar trading was also affected by continued increase in global oil prices, Mr. Ricafort said.

Reuters said pump prices inched up for the fifth straight day on Monday amid supply concerns as demand conditions to recover due to easing restrictions.

Brent crude rose 92 cents or 1.2% to $79.01 a barrel by 0208 GMT on Monday. Meanwhile, US oil prices increased 83 cents or 1.1% to $74.81 per barrel.

For Tuesday, the trader gave a forecast range of P50.90 to P51.10, while Mr. Ricafort expects the local unit to move within P50.80 to P51.10 versus the greenback. — Luz Wendy T. Noble with Reuters