Peso plunges on strong US inflation data, Fed bets

THE PESO plunged against the dollar on Monday to its weakest finish in more than two months due to stronger-than-expected US inflation data as well as market expectations of a US Federal Reserve hike.

The local currency ended yesterday’s session at P51.185 versus the greenback, dropping by 34.5 centavos from its P50.84- per- dollar close on Friday.

This is the local unit’s weakest close in two months or since when it finished at P51.205 against the greenback last Nov. 13.

The peso traded weaker the whole day, opening the session at P50.90 versus the dollar, which was also yesterday’s best showing. The peso’s intraday low, meanwhile, stood at P51.20 against the greenback.

Dollars traded slumped to $ 892.25 million from the $ 1.05 billion that changed hands in the previous session.

“The peso dipped strongly today following the release of stronger- than- expected US personal consumption expenditure (PCE) inflation data,” a trader said in an e-mail on Monday.

The trader said PCE inflation, the measurement preferred by the Fed, came out at 2.8% in the fourth quarter of year compared with the figure a quarter ago. This

was faster than the market expectation of 1.8%

Meanwhile, Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, said expectations of a Fed hike soon boosted the dollar,

“I think it’s more of external pressures... They are saying [that the Fed] is going to hike its interest rates three times this year and a lot faster in 2019. Four interest hikes,” Mr. Asuncion said.

He added that market players are also looking at Philippine inflation data for this month, which will be released next week. “Some investors are also looking at a heightened inflation this January. Maybe that’s one source of sentiment from the market.”

For today, Mr. Asuncion expects the peso to move between P51 and P51.50, while the trader gave a slimmer range of P51 to P51.40.

“The local currency is expected to recover [ today] amid likely stronger initial GDP ( gross domestic product) growth data from the Eurozone and possible weaker US non-farm private employment data which can weaken the dollar,” the trader said.