Peso declines on Fed comments

THE PESO opened the week lower after some US Federal Reserve officials gave hawkish remarks on its interest rate hike plans and amid domestic corporate demand intraday.

The local currency closed at P50.29 against the greenback on Tuesday, down seven centavos from its P50.22- per- dollar finish on Friday.

The peso opened the session at P50.20 against the dollar while its intraday trough was seen at P50.30 against the foreign currency. Its peak for the day was at P50.19 versus the greenback.

Dollars traded totalled $452.65 million on Tuesday, down from the $557.3 million that changed hands the previous session.

One trader attributed the weakening of the local currency against the greenback to hawkish comments from several Fed officials.

“The dollar traded higher due to some hawkish statements from various Fed officials. First was New York Fed William Dudley’s speech then followed by other Fed policy makers, so technically that’s what the pair took cue on,” the trader said by phone yesterday.

In a speech on last week, Mr. Dudley said the tightening US labor market should boost inflation, which may mean that the Fed still has plans to increase rates by yearend.

Reuters had reported that the CME FedWatch bared global investors are pricing in around a 50% chance that the US central bank will tighten rates anew before 2017 ends.

Meanwhile, San Francisco Fed President John Williams said on Monday that slower US inflation was on the back of one-off factors and should not halt the regulator’s plan of lifting borrowing costs further this year.

The US central bank decided to hike interest rates by a quarter of a percentage point to within 1% to 1.25% during its two- day Federal Open Market Committee meeting last week. This is the second time the regulator increased rates this year since its March policy meeting.

Meanwhile, another trader said corporate demand caused the dollar to go higher against the peso yesterday.

“Trading was mainly demand driven. There was corporate demand so the market was moving against its Asian peers,” the trader said by phone.

“I’m seeing a lot of corporate flows, particularly in the oil sector. Other than that, it’s just really a quiet trading day,” the trader added.

For Wednesday, one trader said the exchange rate may settle within the P50.20 to P50.40 range while the other trader said the peso may play within P50.20 to P50.40 to the dollar.

Most emerging Asian currencies traded within a narrow range on Tuesday as investors waited to see if Fed Chair Janet L. Yellen would stick to her positive economic outlook at an event later in the day. The Fed chair is due to join a discussion in London on global economic issues that takes place after a recent batch of weak US economic data.

Showing how little regional currencies moved, the Indian rupee was the big gainer, though it only edged up 0.1%.—