THE PESO plunged to an 11-year low against the dollar on Monday even as equity markets corrected amid hopes for the US Federal Reserve to tighten its rates this year.
The local currency closed Monday’s trading session at P51.77 versus the dollar, down 29 centavos from its P51.48 finish on Friday.
This was the peso’s worst finish in more than 11 years or since it ended at P51.87 against the greenback on July 25, 2006.
The peso traded weaker the whole day, opening the session at P51.55 against the greenback. It hit a low of P51.775 intraday, while its best showing was at P51.485 per dollar.
Dollars traded slid to $930.6 million from the $1.17 billion that changed hands in the previous session.
“The peso probably still took the cue from last week,” Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, said in a mobile phone message.
Mr. Asuncion attributed Monday’s slump to the “huge correction” of global equities.
“For global markets, I think the value lost was in trillion,” Mr. Asuncion added.
A trader meanwhile said the peso traded lower yesterday as “investors already factored in the release of US inflation figures this week.”
Median forecasts are for consumer price inflation to slow a little to 1.9% in January from a year earlier, mainly due to the base effect of a high reading in January 2017, while the core measure is seen ticking down to 1.7%, according to a report from Reuters.
Although the trader said that stronger US inflation might signal tightening moves from the Fed on its March rate decision, Mr. Asuncion noted that: “The US dollar was weaker as fears of faster interest-rate hikes persisted.”
Last week, officials of US Federal Reserve affirmed market expectations of three rate hikes this year, saying it is reasonable to hike given the boost provided by the recently passed tax reform law to the American economy.
For Tuesday (Feb. 12), the trader sees the peso moving between P51.55 and P51.95 versus the dollar.
“The US inflation outlook might still cause the peso to weaken [today] amid bargain-hunting positions for the dollar in view of a stronger inflation reading for January,” the trader said.
Meanwhile, most Asian currencies firmed against the US dollar on Monday, as regional equities gained following a rise in S&P futures, while the greenback slipped after US Congress signed a deal that will push budget deficits past $1 trillion annually.
Asian share markets showed signs of recovery on Monday from a dramatic sell-off last week. — K.A.N. Vidal with Reuters