THE PESO sank to a fresh three-week low against the dollar on Tuesday as players await the policy decisions of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

The local unit closed at P58.871 per dollar on Tuesday, sliding by 20 centavos from its P58.671 finish on Monday, Bankers Association of the Philippines data showed.

This was the peso’s weakest finish since its record-low P59-per-dollar close on Nov. 26.

The peso opened Tuesday’s session weaker at P58.74 against the dollar. Its intraday high was at P58.71, while its worst showing was at P58.885 versus the greenback.

Dollars exchanged inched down to $1.43 billion on Tuesday from $1.48 billion on Monday.

The peso continued to weaken against the dollar as the market traded cautiously ahead of the policy meetings of the Fed and the BSP, a trader said by phone.

The Fed was set to start its two-day policy meeting overnight. Markets widely expect another 25-basis-point (bp) cut at the meeting and are also awaiting the central bank’s updated economic and rate projections.

The US central bank began its easing cycle in September with a 50-bp cut and followed it up with a 25-bp reduction in November, bringing the fed funds rate to the 4.5%-4.75% range.

Meanwhile, the BSP will meet to discuss policy on Dec. 19 (Thursday). A BusinessWorld poll conducted last week showed that 13 out of 16 analysts expect the Monetary Board to reduce benchmark borrowing costs by 25 bps for a third straight meeting.

The BSP kicked off its rate-cut cycle in August with a 25-bp reduction. It slashed borrowing costs by another 25 bps in October to bring the target reverse repurchase rate to 6%.

The dollar was generally stronger on Tuesday following higher US Treasury yields due to President-elect Donald J. Trump’s proposed tax policies, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Wednesday, the trader sees the peso moving between P58.50 and P59 per dollar, while Mr. Ricafort expects the local unit to range from P58.75 to P58.95.

The trader said the peso-dollar pair will likely consolidate before the policy announcements of the Fed and the BSP.

The dollar held firm and near recent peaks on Tuesday, on the eve of an expected interest rate cut in the United States, as traders have ratcheted long-term rate assumptions higher, Reuters reported.

The friendless euro, which is heading for a calendar-year drop of nearly 5% on the dollar, was not far from recent troughs and traded at $1.0509 in the Asia session with markets in a holding pattern ahead of the Fed decision.

The yen was steady at 154.06 per dollar, after six straight days of selling as markets have pared chances of a Japanese rate hike this week in favor of a move in January. — AMCS with Reuters