Peso hits new lows ahead of rate action

THE PESO weakened to a fresh 12-year low ahead of possible rate hikes by the central bank and the Federal Reserve as well as elevated trade tensions between the United States and China.

The peso ended Tuesday’s session at P54.31 against the dollar, weaker than the P54.23-perdollar finish on Monday.

This was the peso’s weakest in nearly 13 years since it closed a P54.425 versus the dollar on Nov. 22, 2005.

The peso was weaker the whole day, opening the session at P54.245, the high. The low was P54.35.

Trading volume declined to $668.35 million from $670.6 million on Monday.

“The peso depreciated to a new record low due to continued positioning for the dollar [on the back of] renewed escalation of US-China trade tensions following sharp comments from China,” a foreign exchange trader said in an e-mail.

According to Reuters, Beijing accused Washington of engaging in “trade bullyism” to intimidate other countries.

The world’s two largest economies launched another round of tariffs against each other’s goods.

On Monday, President Donald J. Trump’s imposition of 10% duties on $200 billion worth of Chinese goods took effect, after China announced levies on $60 billion worth of US products.

Aside from the escalating tensions, the trader added that the market also factored in a possible 25-basis-point rate hike from the Fed.

The US central bank is expected to hike its key rates during the meeting of its policy-setting Federal Open Market Committee (FOMC) on Thursday.

“Investors are on the sideways since this week is quite heavy on key events such as the FOMC meeting together with the Philippine monetary policy decision,” another trader said.

The Bangko Sentral ng Pilipinas is also widely expected to raise interest rates on Sept. 27 to quell inflation expectations following the stronger-thanexpected inflation of 6.4% in August.

“The peso traded weaker [on Tuesday]. As we see offers at 35, demand was not so big it didn’t go beyond that. After filling all demand at 35, we saw it closed at 31,” the first trader added, referring to the currency’s centavo values past P54.

On Wednesday, the first trader expects the peso to move between P54.20 and P54.35, while the other gave a range of P54.20-P54.40.

“The peso’s weakness might persist ahead of key rate decisions on Thursday,” the first trader noted. —