THE PESO slid to a fresh 12-year low against the dollar on Thursday following the interest rate hike of the US central bank.
The local currency ended the session at P53.27 against the greenback on Thursday, four centavos weaker than the P53.23-per-dollar finish logged the previous day.
This is a new low for the local unit in nearly 12 years or since it closed at P53.55 per dollar on June 29, 2006.
The peso declined against the dollar immediately, opening the session at P53.30. It slumped to a P53.37 low, while its best showing for the day stood at P53.26 against the US currency.
Dollars traded rose to $796.45 million from the $773.17 million logged the previous day.
Traders said the peso weakened against its US counterpart following the decision of the Federal Reserve to raise its interest rates, the second increase of the year.
At its two-day review, the policy-setting Federal Open Market Committee (FOMC) hiked its benchmark rates by a quarter of a percentage point amid low unemployment and higher wages. The federal funds rate now stands at a 1.75%-2% range. The Fed also signalled two more rate hikes this year and four more in 2019.
“The economy is very well,” Fed Chairman Jerome Powell said in a press conference after the FOMC released its unanimous policy statement.
Reuters reported the Fed’s move was considered a milestone in the shift of the monetary authority from policies used to mitigate the effects of the financial crisis and recession in 2007-2009.
“The peso weakened following increased expectations of two more rate hikes from the Fed this year after increasing policy rates by 25 basis points,” a trader said in an e-mail.
Another trader said the number of rate hikes this year “came a little bit of a surprise” as the market previously expected the Fed to hike rates only thrice this year.
For next week, the trader expects the peso to consolidate against the dollar as investors await for the monetary policy meeting of the Bangko Sentral ng Pilipinas on June 20.
Financial markets are closed on Friday in observance of Eid al-Fitr. — Karl Angelo N. Vidal

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