THE PESO depreciated against the dollar on Tuesday as officials from the US Federal Reserve continued to temper market optimism of possible rate cuts next year.
The local unit closed at P55.95 per dollar on Tuesday, weakening by eight centavos from P55.87 on Monday, based on Bankers Association of the Philippines data.
The peso opened Tuesday’s session at P55.80 against the dollar, which was also its intraday best, while its weakest showing was at P56 versus the greenback.
Dollars exchanged surged to $1.31 billion on Tuesday from $798.7 million on Monday.
The peso was dragged down by a stronger dollar on Tuesday as Fed officials continued to temper market optimism of possible rate cuts in 2024, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The peso continued to depreciate after Fed officials [Chicago Federal Reserve Bank President Austan Goolsbee] and [New York Federal Reserve President John Williams] pushed back on any discussions of possible rate cuts next year,” a trader likewise said in an e-mail.
The US central bank last week kept the Fed funds rate steady at the 5.25%-5.5% range for a third straight time on Dec. 12-13, with Fed Chair Jerome H. Powell saying they are likely done hiking borrowing costs.
It raised rates by a total of 525 basis points from March 2022 to July 2023.
The dollar was also boosted by the Bank of Japan keeping its key rate steady, Security Bank Corp. Chief Economist Robert Dan J. Roces added in a Viber message.
For Wednesday, Mr. Roces said the peso might be supported by a weaker dollar, while the trader said it could weaken ahead of likely upbeat US consumer confidence data.
Mr. Roces sees the peso ranging from P55.50 to P55.80 per dollar on Wednesday, while the trader expects it to move between P55.85 and P56.10. Mr. Ricafort sees the local unit trading between P55.85 and P56.05. — Aaron Michael C. Sy