Peso weakens to P59:$1 level on hawkish Fed meet minutes


THE PESO closed at its record low for the third time this month as the minutes of the US central bank’s September meeting showed policy makers want to continue raising rates. — BW FILE PHOTO

THE PESO retreated versus the greenback on Thursday following the release of the minutes of the US Federal Reserve’s September meeting, which markets saw as hawkish.

The local unit closed at P59 per dollar on Thursday, down by 3.5 centavos from its P58.965 finish on Wednesday, data from the Bankers Association of the Philippines showed. This matched the peso’s record low first logged on Oct. 3 and then on Oct. 10.

For the year so far, the peso has weakened by 15.68% or P8 from its P51 close on Dec. 31, 2021.

The local currency opened Thursday’s session at P58.90 versus the dollar. Its intraday best was at P58.85, while its weakest showing was its close of P59 against the greenback.

Dollars exchanged went up to $524.08 million on Thursday from $505.37 million on Wednesday.

The peso weakened following hawkish cues from the Fed policy meeting minutes released overnight, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message. 

During the Fed’s Sept. 20-21 monetary policy meeting, a number of officials “emphasized the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action.”

Fed officials said it is important to stay the course in fighting inflation “even as the labor market slowed.”

However, the minutes contained a hint of dovishness regarding the pace of the Fed’s tightening, with numerous policy makers noting to “calibrate” the pace of further rate hikes to reduce “significant adverse effects.”

The Fed has raised rates by 300 basis points (bps) since March, with the latest move being a third straight 75-bp hike at the September meeting.

The peso also depreciated ahead of the release of September US consumer inflation data on Thursday, Mr. Ricafort added.

Meanwhile, a trader said in an e-mail that the peso dropped after the release of latest US producer inflation data on Wednesday.

Data from the US Labor department showed US inflation at the wholesale level rose annually to 8.5% in September, marking the third straight decline from 8.7% in August and 9.8% in July.

However, the large year-on-year increase may suggest inflation pressures are still strong.

For Friday, the trader said the peso may rebound on profit taking.

The trader expects the local unit to move from P58.90 to P59 a dollar, while Mr. Ricafort gave a forecast range of P58.85 to P59. — K.B. Ta-asan