Peso weakens against dollar on hawkish Fed expectations
By Aaron Michael C. Sy, Reporter
THE PESO fell against the dollar on Tuesday due to expectations of hawkish comments from US Federal Reserve Chairman Jerome H. Powell on Friday.
It closed at P56.38, weakening by 20 centavos from Friday’s P56.18 finish, data from the Bankers Association of the Philippines’ website showed.
Markets were closed on Monday for a national holiday.
The local currency opened at P56.30 a dollar, appreciated to as much as P56.085 and weakened to as much as P56.40 against the greenback. Dollars traded went down to $1.44 billion from $1.46 billion.
“The peso weakened from hawkish expectations ahead of Fed Chairman Powell’s speech in the Jackson Hole symposium of central bankers,” a trader said in an e-mail.
Mr. Powell is set to deliver a speech on the economic outlook at the Kansas City Jackson Hole Economic Policy Symposium on Aug. 25.
The Fed raised interest rates by 25 basis points (bps) last month, bringing its benchmark overnight rate to 5.25-5.5%.
The US central bank has hiked benchmark rates by 525 bps since it started its tightening cycle in March last year. The Federal Open Market Committee will next meet on Sept. 19-20 to review policy.
The peso was also dragged down by signals from the central bank that this year’s economic growth target would be missed, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. said in a Viber message.
The Bangko Sentral ng Pilipinas (BSP) in its monetary policy report said it expects full year growth to be below the government’s 6-7% target.
“The full-year growth forecasts for 2023 and 2024 were adjusted downward from the previous monetary policy report to reflect slower-than-expected Q2 2023 GDP growth outturn of 4.3%, benign global economic conditions and higher global crude oil prices,” it said.
“The growth forecasts indicate continued economic expansion, albeit at a slower pace, with projected impact of the BSP’s policy rate adjustments peaking in 2024,” it added.
The trader expects the peso to depreciate further against the dollar on Wednesday due to potentially hawkish remarks from other Fed officials.
The trader sees the peso moving between P56.25 and P56.50 a dollar, while Mr. Ricafort expects it to trade between P56.25 and P56.45.
