January 31, 2023

Filipino Guardian

Sentinels of Filipino Free Press

The peso weakens against the dollar as investors await US inflation data

The PESO fell against the dollar on Thursday as markets await the release of US October consumer inflation data. — SW FILE PHOTO

The PESO weakened against the dollar on Thursday on safe-haven demand as the market awaits the release of US inflation data that could dictate the Federal Reserve’s next move.

The local unit closed Thursday at 58.19p against the greenback, weaker by 20 centavos from its close of 57.99p per dollar on Wednesday.

The peso opened Thursday’s trading session weaker at P58.08 against the dollar. Its weakest point for the day was P58.25, while its intraday best was P58 against the greenback.

Dollars traded Thursday fell to $792 million from $1.107 billion recorded on Wednesday.

“The peso weakened amid continued market caution ahead of the US inflation report and US midterm election results,” a trader said in an email.

The US Department of Labor was due to release October consumer price index (CPI) data overnight, which investors believe could provide clues as to the pace of the Fed’s next monetary policy move.

The Fed raised borrowing costs by 75 basis points (bps) for the fourth consecutive month earlier this month, bringing the total hike since March to 375 bps.

The dollar rose ahead of the release of the CPI report. The greenback rose sharply against its peers on Wednesday but later pared some of those gains as investors also priced in the results of the US midterm elections.

The dollar index, which tracks the currency against its key rivals, was last up 0.11% to 110.48.

The greenback has pared some of its gains in recent weeks on hopes that the Fed would consider modest rate hikes as early as its December meeting, following dovish statements from policymakers.

Several Fed officials said the Federal Reserve should be careful not to get “too tight” to avoid sliding the world’s largest economy into recession.

For his part, Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said the peso weakened despite stronger-than-expected Philippine gross domestic product (GDP) in the third quarter.

The Philippine economy grew 7.6% in the third quarter, faster than the revised growth of 7.5% in the second quarter and 7% in the same quarter a year ago, driven by household consumption and investment and growth in the second quarter service sector and industrial sectors.

Pressure for the third quarter also beat the median forecast of 6.1% in a BusinessWorld survey last week.

GDP growth averaged 7.7% for the first nine months, beating the government’s annual target of 6.5% to 7.5%.

For Friday, Mr. Ricafort gave a forecast range of P58 to P58.30 per dollar while the trader expects the local unit to trade within the P58.10 to P58.30 range. — KB Ta-asan