Peso declines vs dollar on lockdown concerns

Peso Dollar

THE PESO closed sideways against the greenback on Wednesday as the market awaits clarity on restrictions on movement after this week and new signals from the US Federal Reserve.

The local unit closed at P48.585 per dollar on Wednesday, depreciating by 1.5 centavos from its P48.57 finish on Tuesday, data from the Bankers Association of the Philippines showed.

The peso opened yesterday’s trading session at P48.53 versus the dollar. Its weakest point was at P48.625, while its intraday best was at P48.52 against the greenback.

Dollars exchanged inched up to $581.8 million on Wednesday from $559.3 million on Tuesday.

The peso depreciated slightly amid concerns over the possibility of an extension of the tight restriction measures currently in effect in Metro Manila and nearby provinces, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Presidential Spokesperson Herminio “Harry” L. Roque on Tuesday said the government is not keen on extending the strict lockdown in these areas, saying the government lacks funds for cash aid.

Mr. Roque said they are instead considering the recommendation of the Department of Health to switch to a modified enhanced community quarantine after the two weeks of strictest form of lockdown in the National Capital Region, Cavite, Laguna, Rizal, and Bulacan.

However, President Rodrigo R. Duterte on Wednesday skipped his weekly address to the nation on the coronavirus disease 2019 (COVID-19) situation in the country and the Palace did not provide further explanation regarding his absence.

COVID-19 infections rose 6,414 on Wednesday to bring the total to 819,164, with active cases now at 158,701.

Meanwhile, a trader said the peso inched down versus the dollar due to “some caution ahead of the release of the Fed policy minutes.”

The Federal Reserve was expected to release the minutes from its last monetary policy meeting later on Wednesday, and market participants were set to parse it for any changes to the US central bank’s economic outlook, Reuters reported.

The US economy is heading for its strongest growth in nearly 40 years, the Fed said after its meeting last month, and central bank policy makers are pledging to keep their foot on the gas despite an expected surge of inflation.

Fed officials expect economic growth to remain above trend for at least two years to come, at 3.3% in 2022 and 2.2% in 2023, compared with estimated long-term potential growth of just 1.8%.

Opinions among the Fed’s 18 current policy makers did shift somewhat, with four now expecting rates may need to rise next year and seven seeing a rate increase in 2023.

Fed Chair Jerome Powell noted the “strong bulk” of the policy-setting Federal Open Market Committee (FOMC) anticipates no interest rate increase until at least 2024, and he added that it was even too soon to talk about scaling back the $120 billion of Treasury bonds and mortgage-backed securities the Fed is buying each month to further prop up the economy.

The FOMC’s policy statement, which kept the benchmark overnight interest rate in a target range of 0-0.25%, was unanimous.

Mr. Ricafort expects the peso to trade from P48.54 to P48.64 versus the dollar today, while the trader expects the local unit to move within the P48.50 to P48.70 levels. — LWTN with Reuters