The peso weakened on Thursday as the US Federal Reserve kept interest rates steady at the close of its policy meeting.
The local unit closed at P48.51 versus the dollar on Thursday, down 12.5 centavos from its P48.385 finish on Wednesday, data from the Bankers Association of the Philippines showed.
The peso opened Thursday’s session at P48.435 per dollar. It reached an intraday high of P48.40 while its weakest showing was at P48.53 against the greenback.
Dollars traded rose to $710.9 million on Thursday from $631.95 million on Wednesday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso declined as the US central bank concluded its policy review.
“The peso was weaker versus the dollar amid some increase in global market risk aversion after Federal Reserve Chairman Jerome Powell signaled uncertainties on the US economic rebound without additional stimulus measures,” Mr. Ricafort said in a text message.
The Federal Reserve on Wednesday vowed to keep interest rates near zero until inflation is on track to overshoot the US central bank’s 2% target, a bold new promise aimed at bringing millions of out-of-work Americans back to the labor market, Reuters reported.
But the new guidance also marked the start of a vigorous monetary policy debate as the Fed shifts from a crisis-era focus on keeping markets afloat during the coronavirus pandemic to managing what it now sees as a steady, multi-year recovery.
“Effectively what we are saying is that rates will remain highly accommodative until the economy is far along in its recovery,” Mr. Powell said in a news conference following the release of the policy statement and new economic projections.
The new promise to “moderately exceed” 2% inflation, he added, “should be a very powerful statement in supporting economic activity.”
The new economic projections showed policy makers now see the economy shrinking 3.7% this year, far less than the 6.5% decline they forecast in June. They see unemployment, which registered 8.4% in August, dropping to 7.6% by the end of the year.
The recovery “is here, and it’s well along,” Mr. Powell said.
For today, Mr. Ricafort sees the peso ranging from P48.45 to P48.60 versus the dollar. — with Reuters