Peso retreats on Fed taper hints, virus concerns
THE PESO weakened to the P50-a-dollar level on Thursday due to signals from the US Federal Reserve of a possible tapering of its asset purchases within the year and lingering concerns over the spread of the Delta variant.
The local unit closed at P50.235 per dollar yesterday, shedding 48.5 centavos from its Wednesday finish of P49.75, data from the Bankers Association of the Philippines showed.
The peso opened Thursday’s session at P49.83 a dollar. Its weakest showing was at P50.37, while its intraday best was at P49.76 versus the greenback.
Dollars exchanged increased to $1.47 billion on Thursday from $1.041 billion on Wednesday.
A trader attributed the peso’s weakness to demand for the dollar following hints from the Fed on the timing of the reduction of its bond purchases.
Fed Vice Chairman Richard Clarida said in a Wednesday webinar that he is in favor of the Fed making an announcement later this year that it will begin to scale back its bond purchases if the economy’s growth stays strong, Bloomberg reported.
The Fed has vowed to retain its asset purchases “until substantial further progress” is seen in its goal of maximum employment and 2% inflation. It is currently purchasing $120 billion of assets every month which include $80 billion of Treasury securities and $40 billion of mortgage-backed debt.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso weakened on rising cases of the Delta variant in countries that already saw a decline in coronavirus cases previously, such as China.
For this Friday, Mr. Ricafort gave a forecast range of P50 to P50.30 while the trader expects the local unit to move between 50.15 and 50.40 a dollar. — L.W.T. Noble with Bloomberg
