Peso slumps to new low
THE PESO weakened against the greenback yesterday, hitting a new 10-year low, as upbeat US jobs data supported the case for another interest rate hike by the US Federal Reserve by yearend.
The local currency closed at P50.695 versus the dollar on Monday, dropping 11.5 centavos from its P50.58- per- dollar finish on Friday.
Yesterday’s close was a fresh low for the peso as this was its weakest close in over a decade or since it ended at P50.735 against the greenback on Sept. 1, 2006.
The peso opened Monday’s session a shade lower at P50.59 per dollar. Its intraday peak was logged at P50.58 against the greenback, while its worst showing for the day was at P50.695-tothe-dollar.
Dollars traded amounted to $438.8 million, down from $514.7 million seen last Friday.
Traders attributed the peso’s weakness against the dollar to upbeat US non-farm payrolls (NFP) data, which boosted expectations of the US central bank hiking interest rates anew before the year ends.
“Last Friday, we saw very good NFP numbers, which was more than what was expected in the market. However, wage growth came out less than what was expected,” one trader said by phone.
Similarly, another trader said on Monday: “The dollar appreciated today, as the jump in US non-farm payrolls increased the chances of another US rate hike before the year ends.”
The US Labor Department reported on Friday that US job growth surged more than expected last month and employers hiked hours for workers, which reflected a tightening in the US labor market, in return, could keep the Fed on track for a third rate hike by yearend despite sluggish wage gains.
Non-farm payrolls jumped by 222,000 jobs in June, driven by hefty gains in healthcare, government, restaurants and professional and business services sectors. That was the second biggest payrolls increase this year and beat economists’ expectations for a 179,000 rise. The economy also created 47,000 more jobs in April and May than previously reported. While the unemployment rate rose to 4.4% from a 16-year low of 4.3% in May, that was because more people were looking for work, a sign of confidence in the labor market.
The Federal Reserve raised its benchmark overnight interest rate in June for the second time this year.
“Still, overall, the dollar remains to be very supported. The data proved the US economy remains to be stable and improving and consistent with the tone of the Fed… Authorities think that any weakness like the previous NFP data may just be transitory, so their view still goes back on the upside of the data and stable economy,” the trader said.
One trader noted that the Bangko Sentral ng Pilipinas (BSP) was present in the market during yesterday’s session. As regulator to the Philippine financial system, the BSP sometimes intervenes in the daily foreign exchange market in order to temper any sharp peso swings and maintain its stability.
The second trader noted that the exchange rate could settle at P51-to-the-dollar level within the month.
“The next target is P51 levels. The range in the next few days depends where the authorities will try to temper the move but it looks as though the higher dollar is the general direction. I think we’ll see the P51 levels or higher than that if this continues... Maybe soon we’ll see it, probably this month or probably next week,” the trader said.
For today, the both traders see the peso moving within P50.60P50.80 versus the dollar.
“The peso might generally move sideways, although it might show some upward bias due to profit-taking amid bets of softer US inflation and likely stronger Philippine data on exports and industrial production. The peso’s correction might be capped by continued expectations of another US rate hike this year,” the other trader said. —