THE PESO weakened against the greenback on Thursday after the US Federal Reserve said it could start reducing its bond-buying program as early as November.
The local currency closed at P50.34 per dollar on Thursday, depreciating by seven centavos from its P50.27 finish on Wednesday, based on data from Bankers Association of the Philippines.
The peso opened at P50.33 versus the dollar. It dropped to as low as P50.45, while its intraday best was at P50.27 against the greenback.
Dollars that changed hands fell to $1.08 billion yesterday from $1.24 billion on Wednesday.
The Fed said on Wednesday it could begin tapering its monthly bond purchases by November if jobs data will remain strong, Reuters reported.
Interest rate hikes may also begin next year once its bond-buying program ends, as nine of 18 Fed policymakers believe borrowing costs have to increase in 2022.
“The local currency might weaken further following BSP’s substantial upward revisions in its inflation projections despite keeping policy rates unchanged,” a trader said via e-mail.
The Bangko Sentral ng Pilipinas (BSP) raised its inflation outlook for the year to 4.4% from 4.1% previously as supply issues continue to push food prices higher. This is beyond the 2-4% target of the central bank for 2021.
The BSP also raised its inflation forecasts for 2022 and 2023 to 3.3% and 3.2%, respectively, from 3.1% previously.
Despite elevated inflation expectations, the central bank kept benchmark rates unchanged on Thursday.
Mr. Ricafort expects the peso to trade from P50.20 to P50.40 per dollar on Friday, while the trader gave a higher P50.25-P50.50 forecast. — BML with Reuters