Peso slumps to three-month low as markets watch Yellen’s last Fed policy meet

THE PESO slumped further against the dollar on Tuesday, logging a three-month low, as market players remained cautious ahead of outgoing US Federal Reserve chair Janet L. Yellen’s last monetary policy meeting.

The local currency ended yesterday’s session at P51.42 versus the greenback, 23.5 centavos weaker than its P51.185-per-dollar finish on Monday.

This is the local unit’s weakest close in three months or since it finished at P51.61 against the greenback last Oct. 30.

The peso traded weaker the whole day, opening the session at P51.30 versus the dollar, which was also yesterday’s best showing. The peso’s intraday low, meanwhile, stood at P51.495 against the greenback.

Dollars traded rose to $926.45 million from the $892.25 million that changed hands in the previous session.

“The peso plunged again today due to caution ahead of the Federal Reserve meeting on Thursday and bets of hawkish remarks from Yellen’s last speech as Fed chair,” a trader said in an e-mail on Tuesday.

Analysts are expecting a hawkish remarks from Ms. Yellen after her last Federal Open Market Committee meeting, which began last night.

However, it is unlikely that the Fed will raise its interest rates during the said meeting, as market players are looking at the March rate hike and two others within the year.

Meanwhile, Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, said expectations of a protectionist rhetoric from President Donald J. Trump’s State of the Union address was also factored in during yesterday’s trading.

“The trend is going south; it’s weakening. But potentially, I see it as not something bad because you see that the pressure on the peso has been coming from increasing imports,” Mr. Asuncion told BusinessWorld in a mobile phone interview.

Data released early this month showed that the country booked a record $3.78-billion trade deficit in the month of November as imports rose 18.5% to $8.74 billion compared with the same period in 2016, while exports only grew 1.6% to $4.96 billion.

For today, Mr. Asuncion said the peso will move between P51.10 and P51.60, while the trader gave a higher range of P51.25 to P51.65.

“The local currency is expected to continue depreciating as markets await for possible cues prior to the Fed meeting and with the last day of [Ms.] Yellen in the US Federal Reserve,” the trader noted. •