THE PESO weakened versus the greenback on Tuesday amid expectations of faster US inflation, which could give the US Federal Reserve a reason to start hiking rates by next month.
The local unit closed at P51.50 per dollar on Tuesday, depreciating by 13 centavos from its P51.37 finish on Monday, data from the Bankers Association of the Philippines showed.
The peso opened Tuesday’s session weaker at P51.40 versus the dollar. Its worst showing was at its close of P51.50, while its intraday best was at P51.38 against the greenback.
Dollars exchanged increased to $1.005 billion on Tuesday from $959.3 million on Monday.
A trader in an e-mail said the peso depreciated as the market expects higher US inflation in January.
US consumer price index (CPI) data will be reported on Thursday. The Fed has said it is ready to respond to elevated prices, citing the possibility of a rate hike by March.
Data from the US Labor department showed the CPI rose by 7% year on year in December, marking its largest annual rise in nearly four decades.
The dollar made small but broad gains on Tuesday and held a resurgent euro at bay as traders awaited US inflation data, wary it could unleash bets on faster interest rate hikes.
The common currency leapt by 2.7% last week after a hawkish shift in tone at the European Central Bank.
The US dollar index rose by 0.2% to 95.613.
Stunningly strong US labor data last week has put extra focus on inflation — forecast at a four-decade high 7.3% — in the lead up to March’s Federal Reserve meeting.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message said there was cautious sentiment in the market as official campaign season has started.
The 90-day campaign period for national candidates kicked off on Tuesday. Leading presidential candidates on Tuesday started their proclamation rallies in their hometowns.
For Wednesday, Mr. Ricafort gave a forecast range of P51.30 to P51.50 versus the dollar, while the trader expects the local unit to move within P51.40 to P51.60. — LWTN with Reuters