THE PESO inched down against the dollar on Monday following the benchmark stock index’s decline and as the market expects the central bank to keep interest rates steady at its meeting this week to support economic recovery.
The local unit closed at P52.35 per dollar, slipping by 1.5 centavos from its P52.335 finish on Friday, based on data from the Bankers Association of the Philippines.
The peso opened Monday’s session at P52.31 against the dollar, stronger than its Friday close. That was also its best showing for the day, while its intraday low was at P52.40 versus the greenback.
Dollars exchanged sank to $599.80 million on Monday from $1.44 billion on Friday.
“The peso weakened amid market expectations that the BSP (Bangko Sentral ng Pilipinas) will hold its policy rate unchanged despite growing domestic inflationary concerns,” a trader said.
The BSP’s policy-setting Monetary Board is expected to keep benchmark interest rates steady at its March 24 meeting as it supports economic recovery, 15 out of 17 analysts polled by BusinessWorld said.
Global oil prices have been surging after the Feb. 24 Russian invasion of Ukraine, further raising inflation concerns here and abroad.
Oil prices also lost ground last week, but were pushing higher on Monday as there was no easy replacement for Russian barrels in a tight market, Reuters reported.
Brent was quoted $3.32 higher at $111.25, while US crude rose $3.36 to $108.06 a barrel.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the peso weakened as local stocks also declined on Monday.
The benchmark Philippine Stock Exchange index (PSEi) fell by 51.03 points or 0.72% to close at 6,956.60 on Monday, while the broader all shares went down by 20.41 points or 0.54% to 3,697.63.
“Peso also weaker after the latest hawkish signals from Fed (US Federal Reserve) officials…and higher US Treasury yields recently after the widely expected…Fed rate hike and more expected to come based on the latest Fed dot plot…” Mr. Ricafort added.
The Fed last week raised rates by a quarter percentage point, the first time since 2018, to help combat rising inflation. It penciled in six more increases for the rest of 2022.
For Tuesday, the trader said the peso might weaken further due to likely hawkish comments from Fed Chair Jerome H. Powell at the National Association for Business Economics Annual Economic Policy Conference scheduled later on Monday.
The trader expects the local unit to move between P52.25 and P52.50 on Tuesday, while Mr. Ricafort gave a forecast range of P52.25 to P52.45 per dollar. — with Reuters