Yellen's rate hike signal weighs on peso

Federal Reserve Chair Janet Yellen's recent speech signaling a more bullish stance on raising interest rates in the US weakened the peso against the greenback on Thursday to test the 50-to-a-dollar mark in the morning session, GMA News reported.

The local currency shed 19 centavos to close at P49.980:$1 from 49.790 on Wednesday.

"They were driven largely by hawkish comments from Fed Chair Janet Yellen," Emilion Neri Jr., lead economist at the Bank of the Philippine Islands, told GMA News Online.

In a speech before the Commonwealth Club of California, Yellen said that holding off too long to begin raising rates could “risk a nasty surprise down the road,” and that it “makes sense” for the Fed to gradually lift rates.

At the Philippine Dealing System, the local unit opened at P50$1.

It was the second intraday low for the peso in less than three months, since it plumbed the 50:$1 level – a 10-year low – on November 24, after the Federal Open Market Committee hinted at raising the Fed fund rates when it meets in December.

It was also the lowest for the Philippine currency since November 11, 2006 when it traded at P50.12 to a dollar.

In a separate text message, Guian Angelo Dumalagan, market economist at the Land Bank of the Philippines, noted an intervention by the Bangko Sentral ng Pilipinas may have kept the peso from staying at the 50to-a-dollar mark.

"It's the same trend observed last year, when the peso tested the 50-mark," Dumalagan said.