Peso drops vs dollar following Silicon Valley Bank deal
THE PESO weakened against the dollar on Tuesday after a buyout deal involving the collapsed Silicon Valley Bank helped ease global banking sector concerns.
The local currency closed at P54.45 versus the dollar on Tuesday, depreciating by 16 centavos from Monday’s P54.29 finish, data from the Bankers Association of the Philippines’ website showed.
The peso opened Tuesday’s session stronger against its Monday close at P54.25 per dollar, which was also its intraday best. Its worst showing was at P54.50 versus the greenback.
Dollars traded surged to $1.64 billion on Tuesday from the $1.082 billion recorded on Monday.
The peso declined after First Citizens BancShares, Inc. agreed to buy all of failed lender Silicon Valley Bank’s deposits and loans, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message
“The peso depreciated from easing global banking concerns after First Citizen Bank agreed to buy Silicon Valley Bank’s assets,” a trader likewise said in an e-mail.
The local unit weakened following hawkish signals from US Federal Reserve officials, Mr. Ricafort added.
Fed Governor Philip Jefferson said that inflation “is too high” and that he would like to see it return to the central bank’s 2% target “sooner as opposed to later,” Reuters reported.
Meanwhile, St. Louis Fed President James Bullard on Friday raised his estimate of how high the Fed’s benchmark overnight interest rate needs to rise by the end of 2023 by a quarter of a percentage point to a 5.5%-5.75% range.
The Fed last week raised interest rates by 25 basis points (bps) to the 4.75%-5% range, but said they could consider a pause soon due to turmoil in the US banking system.
The US central bank has raised rates by 475 bps since March 2022.
For Wednesday, the peso could depreciate further “as the improving short-term global economic outlook could bolster demand for the greenback,” the trader said.
The trader expects the peso to move between P54.35 and P54.60 per dollar, while Mr. Ricafort sees it trading from P54.35 to P54.55. — A.M.C. Sy with Reuters
