Peso weakens vs dollar following comments from Fed chair

THE PESO depreciated against the dollar on Monday as the US Federal Reserve chief said they will be “prudent” in assessing when to ease their policy stance, reiterating that they will not cut interest rates next month.

The local unit closed at P56.29 per dollar on Monday, weakening by 37 centavos from its P55.92 finish on Friday, Bankers Association of the Philippines data showed.

The peso opened Monday’s session weaker at P56.10 against the dollar, which was already its intraday best. Meanwhile, its worst showing was at P56.315 versus the greenback.

Dollars exchanged went down to $1.08 billion on Monday from the $1.6 billion recorded on Friday.

The peso was dragged lower by comments from the Fed chief,

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The US Federal Reserve can be “prudent” in deciding when to cut its benchmark interest rate, with a strong economy allowing central bankers time to build confidence inflation will continue falling, Fed Chair Jerome H. Powell told the CBS news show 60 Minutes in an interview that aired Sunday night, Reuters reported.

The interview took place on Thursday, before a blowout January jobs report on Friday showed firms added 353,000 new positions, with continued strong wage growth and 3.7% unemployment that has barely budged in two years.

“The peso weakened following the stronger-than-expected US employment reports,” a trader added.

For Tuesday, the local unit may rebound against the dollar on expectations of slower Philippine headline inflation last month, the trader said.

A BusinessWorld poll of 16 analysts last week yielded a median estimate of 3.1% for January headline inflation, settling within the 2.8-3.6% forecast of the Bangko Sentral ng Pilipinas (BSP).

If realized, this would be the second consecutive month that inflation will be within the BSP’s 2-4% target band and be below the 3.9% print in December and 8.7% in the same month a year ago.

January inflation would also be the slowest since the 3% print in February 2022.

Mr. Ricafort expects the peso to move between P56.15 and P56.35 per dollar on Tuesday, while the trader sees the local unit ranging from P56.15 to P56.40 against the greenback. —