Peso weakens back to 58:$1

MANILA, Philippines, August 1 ------ The peso fell back to the 58 to $1 level yesterday, marking its weakest finish in five months, as strong US economic data and hawkish comments from the Federal Reserve lifted the dollar across global markets.

Based on data from the Bankers Association of the Philippines, the local currency weakened by 74 centavos to close at 58.32 against the dollar yesterday from Wednesday’s 57.58 finish. This was the peso’s weakest level since Feb. 4, when it settled at 58.34 to $1. “Broad dollar strength dominated global markets after the Fed held interest rates steady, with US gross domestic product (GDP) coming in stronger than expected,” a trader said. “Locally, we also saw a pickup in demand ahead of the import season.”

Another trader said the peso tracked broad dollar strength fueled by upbeat US data and Fed chair Jerome Powell’s tone, which markets interpreted as hawkish following the policy hold. The US Federal Reserve kept its key interest rate unchanged in the 5.25 to 5.50-percent range for a fifth straight meeting on Wednesday amid low unemployment rate and still-elevated inflation. While Powell acknowledged growing speculation over a potential cut in September, he offered no clear signal. “We have made no decisions about September,” he said, noting that the Fed has time to evaluate more data before its next meeting. “Rate cut bets were trimmed, pushing spot toward the 58-level as offshore demand stayed strong,” the second trader said.

The local currency opened weaker at 57.86 to $1. Its intraday best reached 57.85 against the greenback before losing steam to hit an intraday worst of 58.40. Trading volume also surged, jumping by 33.8 percent to $2.6 billion from $1.9 billion the previous day, reflecting strong offshore dollar demand.

Source: philstar.com