THE PESO sank to an over three-week low against the dollar on Monday on expectations of a more cautious US Federal Reserve as strong jobs data stoked fresh inflation concerns.
The local unit closed at P58.70 per dollar on Monday, plummeting by 34 centavos from its P58.36 finish on Friday, Bankers Association of the Philippines data showed. This was the peso’s weakest finish in more than three weeks or since its P58.81-a-dollar close on Dec. 20, 2024
The peso opened Monday’s session weaker at P58.525 against the dollar. Its intraday best was at P58.50, while its worst showing was at P58.70 versus the greenback.
Dollars exchanged declined to $1.35 billion on Monday from $1.82 billion on Friday.
“The peso closed lower on the back of a strong dollar following stronger-than-expected US nonfarm payrolls and unemployment rate, which reduced bets of a rate cut by the Fed,” a trader said by phone.
Rising consumer inflation expectations in the US also affected Fed easing bets, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.
For Tuesday, the trader sees the peso moving between P58.50 and P58.80 per dollar, while Mr. Ricafort expects it to range from P58.60 to P58.80.
The dollar charged higher on Monday and drove its peers to multi-year lows after a blowout US jobs report underscored the strength of the world’s largest economy and muddied the outlook for further Federal Reserve rate cuts this year, Reuters reported.
The greenback surged to its highest in over two years on Monday against a basket of currencies to peak at 109.98, extending a rally from last week.
Trading was thinned in the Asian session with Japan markets closed for a holiday, but nonetheless moves in the foreign exchange market were volatile and other currencies notched fresh lows on the back of the dollar’s strength.
Friday’s data showed US job growth unexpectedly accelerated in December while the unemployment rate fell to 4.1% as the labor market ended the year on a solid footing, leaving traders heavily scaling back bets of Federal Reserve rate cuts this year.
Markets are now pricing in just 27 basis points worth of Fed rate cuts this year, down from roughly 50 bps at the start of the year.
With Wednesday’s reading on US inflation up next, any upside surprise could threaten to close the door on easing altogether. A slew of Fed officials is also due to speak this week. — A.M.C. Sy with Reuters
