THE PESO weakened to a near two-month low against the dollar on Monday after the release of US personal consumption expenditures (PCE) inflation data, which bolstered expectations of more rate hikes from the US Federal Reserve.

The local currency closed at P55.51 versus the greenback on Monday, down by 64 centavos from Thursday’s P54.87 finish, data from the Bankers Association of the Philippines showed.

This was the peso’s worst close since it finished at P55.64 on Jan. 6.

The peso opened Monday’s trading session sharply weaker at P55.25 per dollar. It posted an intraday best of P55, while its worst showing was at P55.64 against the greenback.

Dollars traded went up to $1.33 billion on Monday from $1.109 billion on Thursday.

The peso weakened after higher-than-expected US PCE price index data and hawkish signals from Fed officials, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The peso depreciated significantly from heightened expectations of more US rate hikes following the surprise acceleration in the Fed’s preferred inflation gauge,” a trader said in an e-mail.

The US PCE price index shot up 0.6% last month after gaining 0.2% in December, according to data released on Friday.

Cleveland Fed President J. Loretta Mester, St. Louis Fed President James Bullard, Boston Fed President Susan M. Collins, and Fed Governor Christopher J. Waller last week all said they would support more rate hikes to tame inflation.

The Fed hiked its target interest rate by 25 basis points (bps) at its Jan. 31 to Feb. 1 meeting to a range between 4.5% and 4.75%, bringing total increases since March 2022 to 450 bps.

The US central bank’s next policy meeting is on March 21-22.

Mr. Ricafort added that the stronger US dollar also pulled down the local currency.

The dollar index, which measures the US currency against six major peers, was at 105.17, just below the seven-week peak of 105.32 it touched on Friday after hotter-than-expected US data, Reuters reported. The index is up 3% for February and set to snap a four-month losing streak.

For Tuesday, the trader said the peso could rebound on expectations of a weaker US durable goods report overnight.

The trader expects the peso to trade between P55.35 and P55.60 against the greenback on Tuesday, while Mr. Ricafort gave a forecast range of P55.40 to P55.60. — A.M.C. Sy with Reuters