THE PESO retreated versus the greenback on Wednesday as the country’s debt ratio increased and following hawkish signals from the US Federal Reserve.

The local unit finished at P51.045 per dollar on Wednesday, depreciating by 9.5 centavos from its P50.95 close on Monday, based on data from the Bankers Association of the Philippines.

The market was closed on Tuesday due to the Lunar New Year holiday.

The peso opened Wednesday’s session weaker at P51.05 per dollar. Its worst showing was at P51.18, while its intraday best was at P50.99 against the greenback.

Dollars exchanged increased to $1.187 billion on Wednesday from $980.79 million on Monday.

The peso weakened versus the greenback due to cautious sentiment on the national government’s increasing debt, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The national government’s outstanding debt reached P11.73 trillion as of end-December, rising by nearly P2 trillion or 19.7% year on year, the Bureau of the Treasury said on Tuesday.

This brought the debt-to-gross domestic product (GDP) ratio in 2021 to 60.5%, which is the highest since the 65.7% seen in 2005. It was also slightly above the 60% threshold considered as manageable by multilateral lenders for developing economies.

Meanwhile, a trader in an email said the market also factored in hawkish signals from a Fed official.

Kansas City Fed President Esther George said the Fed can start reducing its bond holdings sooner than what it had done in the past and to shrink the Fed’s portfolio, Reuters reported.

“[I]f we took more aggressive action on lowering, pulling down that balance sheet, it might allow for fewer interest rate increases.” Ms. George said at an event on Monday.

For Thursday, Mr. Ricafort gave a forecast range of P50.90 to P51.10 per dollar, while the trader expects the local unit to move within P50.90 to P51.15. — L.W.T. Noble with Reuters

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