Peso drops ahead of likely Fed hike

THE PESO dropped against the dollar on Thursday as investors took positions ahead of a possible interest rate hike from the US central bank.

The local unit ended Thursday’s session at P52.49 against the greenback, 10.5 centavos weaker than its P52.385-per-dollar finish on Wednesday.

The peso immediately slipped as it opened the session, dropping to P52.42. Its intraday low stood at P52.50, while its best showing was at P52.58 versus the greenback.

Dollars traded declined to $457.4 million from Wednesday’s $859.1 million.

A trader said the peso weakened against its US counterpart ahead of a possible interest rate hike from the Federal Reserve next week following a similar move last March.

“Economic data from the US have been generally upbeat in the past few weeks and markets are already pricing in that the Fed would be very likely to raise interest rates,” the trader noted.

Meanwhile, another trader said the peso declined due to corporate demand.

“We saw an unusual move because the peso weakened despite the strong equity market. I think the main driver was corporate demand. We saw huge corporate demand [on Thursday] that’s why it pushed the peso lower,” the trader said.

UnionBank of the Philippines chief economist Ruben Carlo O. Asuncion, on the other hand, noted that the gross international reserves (GIR) data released by the Bangko Sentral ng Pilipinas yesterday did not affect the movement of the peso.

The country’s dollar reserves dipped to $78.968 billion in May, the lowest level since November 2014, as the central bank used the funds to temper sharp swings

in the exchange rate amid gold valuations and its debt payments.

On Friday, the second trader sees the peso moving between P52.20 and P52.40, while Mr. Asuncion gave a P52.20-P52.50 forecast range.

“The local currency might weaken due to possible wider local trade deficit data to be released [on Friday],” the first trader noted, giving a range of P52.40-P52.60.