Peso drops to P51:$1 level anew

THE PESO weakened to drop to the P51-per-dollar level anew on Wednesday, as the US Federal Reserve affirmed its hawkish tone, hinting on another interest rate hike before the year ends.

The local unit closed at P51.02 against the greenback on Wednesday, eight-and-a-half centavos down from the P50.935-per-dollar close recorded in the previous session.

The peso opened at P50.98 per dollar. It dropped to as low P51.06 versus the greenback, which its intraday peak was at P50.88.

Dollars traded were valued at $675.7 million, down slightly from the $687.9 million recorded on Tuesday.

Analysts interviewed separately said the dollar’s rally was due to US Federal Reserve chair Janet L. Yellen’s hawkish remarks during her speech during the National Association for Business Economics meeting in Cleveland late Tuesday, bolstered by US President Donald J. Trump’s speech bearing details on his tax reform plan.

“The peso weakened again today, as the US Fed Chair Yellen kept open the possibility of another US rate hike this year during her recent speech,” Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines, said in an e-mail on Wednesday.

“Without further modest increases in the federal funds rate over time, there is a risk that the labor market could eventually become overheated, potentially creating an inflationary problem down the road that might be difficult to overcome without triggering a recession,” Ms. Yellen said on Tuesday. The Fed hiked rates twice this year — by 25 basis points each in March and June.

A trader also attributed the peso’s dip to Mr. Trump’s speech where he bared plans to cut individual and corporate taxes. “The dollar was strong even before the tax reform speech. So it’s just traders retracing some of those losses.”

Traders said that the market will look at developing tensions between US and North Korea, as well as the release of a second estimate of US gross domestic product (GDP) growth for today’s trading.

“There will be a GDP release, so if it’s better than expected, the upward momentum will be sustained,” the trader said.

“But we’ll still be focused on the tension. It will fuelled by the risk aversion, to so they’re going to still buy the dollar,” the trader added.

Traders expect the peso to trade within a P50.9 to P51.20 per dollar range today. — E.J.C. Tubayan with Reuters