THE PESO may weaken this week as the market braces for a rate hike from the US Federal Reserve and as the crisis in Ukraine continues.

The local unit closed at P52.29 on Friday, depreciating by 13.5 centavos from its P52.155 finish on Thursday, based on Bankers Association of the Philippines data.

It also weakened by 55 centavos from its P51.74 finish on March 4.

The peso opened Friday’s session at P52.25 per dollar. Its weakest showing was at P52.34, while its intraday best was at P52.21 against the greenback.

Dollars exchanged declined to $1.099 billion on Friday from $1.208 billion on Thursday.

The peso depreciated as faster US inflation caused concern among market participants, a trader said in an e-mail.

Reuters reported that US consumer price index rose by 7.9% in February, mainly due to the faster increase in the prices of rent, food, and gasoline, based on data from the Labor department. This is the quickest pace since January 1982 and is nearly four times higher than the 2% target by the US Federal Reserve.

The surge in oil prices to its multi-year highs over the week was also a major factor for the peso’s depreciation, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

The peso on March 7 hit the P52-per-dollar level and closed at P52.18, the same day oil prices reached their highest since July 2008.

On Friday, benchmark oil indices declined by 5-6% week on week after major producing countries became open to boosting supply.

For this week, the market will wait for the Fed’s policy decision as well as new signals regarding its monetary policy, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Federal Open Market Committee will have its policy review on March 15-16, where it is expected to start raising interest rates as previously signaled.

Fed Chairman Jerome H. Powell has said he will support a 25-basis-point hike for the March review and was open to more aggressive policy tightening to quell inflation.

Meanwhile, UnionBank’s Mr. Asuncion said the market will also monitor the unfolding events between Russia and Ukraine, as the peso could depreciate if there’ll be no progress in diplomatic efforts.

For this week, Mr. Asuncion gave a forecast range of P51.90 to P52.50 versus the dollar, while Mr. Ricafort expects a tighter band of P52 to P52.40. — Luz Wendy T. Noble with Reuters

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