THE PESO closed at the P56-per-dollar level for the first time in almost a month on Wednesday as investors were cautious ahead of the US Federal Reserve’s policy decision.
The local unit closed at P56.055 per dollar on Wednesday, plummeting by 48.5 centavos from its P55.57 finish on Tuesday, based on Bankers Association of the Philippines data.
This is the first time the peso ended at the P56 level in nearly one month or since it closed at P56.06 per dollar on Nov. 14.
The peso opened Wednesday’s session slightly weaker at P55.67 against the dollar, which was already its intraday best. Its worst showing was at P56.08 versus the greenback.
Dollars exchanged jumped to $1.6 billion on Wednesday from $1.01 billion on Tuesday.
“The peso weakened past the P56 level amid market caution ahead of the US Federal Reserve policy meeting,” a trader said in an e-mail.
The dollar ticked up slightly on Wednesday as traders prepared for the conclusion of a Federal Reserve policy meeting that could offer some insight into when the US central bank will begin lowering interest rates, Reuters re-ported.
The US dollar index, which gauges the currency against six others, added 0.1% to 103.86 as of 0540 GMT, recouping a little of the previous day’s 0.31% drop.
Fed officials were set to give updated economic and interest rate projections later in the day following a meeting where analysts and investors expect rates to remain unchanged at the 5.25%-5.5% range for a third straight meeting.
In particular, investors will be watching to see if Fed Chair Jerome H. Powell pushes back against the prospect of interest rate cuts in the first half of 2024, but also what the central bank’s “dot plot” says about policy makers’ thinking regarding the outlook for monetary policy.
The peso was also dragged lower by El Niño concerns, as this could lead to a pickup in domestic inflation, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Philippine Atmospheric, Geophysical and Astronomical Services Administration last week said a strong El Niño has intensified in the Tropical Pacific, with sea temperature anomalies exceeding 1.5 degrees centi-grade from normal levels.
This could result in a drought for 77% of the provinces in the country, while 65% of the provinces may see a dry spell, Science and Technology Secretary Renato U. Solidum, Jr. said.
Philippine headline inflation stood at 4.1% in November, easing from the 4.9% in October and 8% in the same month last year.
This was the slowest rate in 20 months or since the 4% seen in March 2022.
In the 11 months through November, headline inflation averaged 6.2%, faster than 5.6% in the same period a year ago. This was still above the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target and 5.6% baseline forecast for 2023.
For Thursday, the trader said the peso could recover against the dollar on profit taking and ahead of the BSP’s policy meeting.
The trader sees the peso moving between P55.85 and P56.10 per dollar on Thursday, while Mr. Ricafort expects it to range from P55.90 to P56.10. — A.M.C. Sy with Reuters
