Peso sinks to fresh trough on Fed

THE PESO declined against the dollar to log a new 12-year low on Thursday following the release of minutes of the US Federal Reserve’s May policy meeting.

The local currency ended Thursday’s session at P52.55 against the greenback, eight centavos weaker than the P52.47 finish on Wednesday.

Yesterday’s finish was the peso’s weakest in nearly 12 years since July 19, 2006, when it closed at P52.745.

The peso immediately slid as it opened the session at P52.50 against the greenback. It dipped to a P52.60 low, while its intraday high stood at P52.45.

Dollars traded ended yesterday at $899.95 million, climbing from the $529.9 million logged in the previous session.

Traders interviewed on Thursday said the peso slipped as a response to the minutes of the policy-setting Federal Open Market Committee’s (FOMC) May 1-2 meeting.

“The peso depreciated following the release of May [ FOMC] policy minutes which hinted that the Fed might continue to raise policy rates within the year,” a trader said through e-mail.

Most Fed policy makers, according to a Reuters report, said another interest rate increase is likely needed “soon” if the US economic outlook remains intact, minutes of the meeting last month showed.

“Most participants judged that if incoming information broadly confirmed their current economic outlook, it would likely soon be appropriate...to take another step in removing policy accommodation,” the Fed said in the minutes.

Meanwhile, UnionBank of the Philippines chief economist Ruben Carlo O. Asuncion said the minutes showed a “dovish” Fed.

“The peso barely moved as it took its cue from the dovish Fed saying that there is no reason to rush rate hikes,” Mr. Asuncion said in a text message Thursday.

Likewise, he noted that the Fed “did acknowledge that the world’s biggest economy continues to improve.”

The US central bank raised borrowing costs during their March meeting. Investors will wait if the Fed decides to lift the rate once more at the next meeting on June 12-13.

For today, the trader sees the peso to move between P52.40

and P52.65 versus the greenback as local players might take the opportunity to take profits after succeeding days of strong dollar.

Meanwhile, Mr. Asuncion gave a P52.20-P52.60 forecast trading range.

Most other emerging Asian currencies strengthened on Thursday as the dollar weakened following seemingly dovish minutes from the Federal Reserve’s last policy meeting and possible new US tariffs.

While the minutes showed most policy makers thought it likely another interest rate increase would be warranted, the minutes also assuaged fears the Fed would speed up the tempo at which it raises rates.

Caution was magnified by new setbacks in US-China trade talks and as US President Donald J. Trump raised the prospect of new tariffs on imported cars.

Indonesia’s rupiah, which has been facing intense volatility of late, firmed 0.3% to 14,160.

Statements from Perry Warjiyo, Bank Indonesia’s newly appointed governor, affirmed its commitment to stabilizing the currency, noting that BI had bought more than 50 trillion rupiah of bonds from foreign holders so far this year.

Singapore’s dollar was a shade firmer at 1.342 after news the city-state’s economy grew slightly faster in the first quarter than initially estimated.

India’s rupee consolidated at 68.325 after falling on Wednesday to its lowest in more than a year.

Surging oil prices have weighed on India, the world’s third largest importer of the commodity, raising fears that soaring costs could drive up inflation and widen the trade deficit. •