Peso plunges to new eight-year trough

THE PESO continued to slide against the dollar yesterday to hit another eight-year low as markets remain jittery over the Federal Reserve’s plan to hike rates next month as well as political uncertainties in the US and due to local corporate demand for the greenback.

The peso ended at P49.83 against the greenback on Monday, five centavos down from its previous finish of P49.78 per dollar.

Yesterday’s finish was a fresh eight-year trough as it was the peso’s weakest close since it ended at P49.999 versus the greenback on Nov. 20, 2008. It is also the local unit’s new low for 2016.

The peso was traded weaker the whole day as it opened the foreign exchange market at P49.82 against the foreign unit, while its low for the day was logged at P49.93. Its strongest intraday level was at P49.80 per dollar.

Dollars traded dropped to $391.6 million from $812.9 million during the previous session, data from the Philippine Dealing & Exchange Corp. showed.

Traders attributed the peso’s slump against the foreign unit to negative market sentiment due to the Fed’s expected rate hike next month and Mr. Trump’s planned fiscal reforms.

“The peso depreciated slightly today still because of risk aversion amid US political uncertainties and concerns over the possibility of a US interest rate hike next month,” a trader said on Monday.

“The markets will wait for a clearer direction, given that the market has already priced in a 94% chance of a Fed rate hike next month despite the FOMC (Federal Open Market Committee) minutes to be released on Thursday,” another trader said, referring to the CME Group’s Fedwatch program.

“Markets are watching out for the Fed, particularly their tone in their December meeting, if there will be another rate hike after their meeting and if there are any more policies that Mr. Trump will release in his administration,” the trader added.

Fed Chair Janet Yellen said last week that Mr. Trump’s victory in the election has nothing to do with the Fed’s plan of raising interest rates “relatively soon.”

One trader added that demand for the greenback was seen as some corporates were “slightly panicking” over a stronger dollar against the peso as they need to cover their obligations and requirements for the month.

For today, one trader sees the peso- dollar pair trading within the P49.50 to P50 range, while the other sees a P49.50 to P49.70 range.

“Trading might still be influenced by worries about December’s likely increase in the federal funds rate. Profit taking, however, might cap the dollar’s appreciation,” one trader said.