Peso inches lower vs dollar on Fed officials’ comments


THE PESO inched lower against the dollar on Thursday amid hawkish signals from US Federal Reserve officials.

The local unit closed at P57.19 per dollar on Thursday, weakening by a centavo from its P57.18 finish on Wednesday, Bankers Association of the Philippines data showed.

This was the peso’s worst finish in almost 17 months or since its P57.375-a-dollar close on Nov. 22, 2022.

The peso opened Thursday’s session slightly stronger at P57.15 against the dollar. Its intraday best was at P57.01, while its weakest showing was at P57.24 versus the greenback.

Dollars exchanged went down to $1.799 billion on Thursday from $1.92 billion on Wednesday.

“What we saw was the start of choppy consolidation in the short term as the pair has begun to show signs of being overbought from a technical perspective,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

Mr. Roces said this was due to Fed Chair Jerome H. Powell’s comments the previous day.

The peso was also dragged down by cautious comments from Cleveland Fed Bank President Loretta Mester and Fed Governor Michelle Bowman, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

Top US central bank officials including Mr. Powell backed away on Tuesday from providing any guidance on when interest rates may be cut, saying instead that monetary policy needs to be restrictive for longer and further dashing investors’ hopes for meaningful reductions in borrowing costs this year, Reuters reported.

Fed policy makers have said since the start of the year that rate cuts are contingent on gaining “greater confidence” that inflation is moving towards the central bank’s 2% goal, but readings over the past few months show price pressures may even be moving in the opposite direction.

“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Mr. Powell told a forum in Washington, in what is likely to be his last public appearance before the April 30-May 1 policy meeting.

Meanwhile, Ms. Mester said on Wednesday she expects price pressures to ease further this year, allowing the Fed to reduce borrowing costs, but only when it is “pretty confident” inflation is heading sustainably to its 2% goal.

Progress on lowering US inflation may have stalled, and it remains an open question whether interest rates are high enough to ensure that it returns to the Fed’s 2% target, Ms. Bowman also said on Wednesday.

For Friday, Mr. Roces said the peso could continue to trade sideways versus the dollar. Mr. Ricafort expects the local unit to range from P57.05 to P57.25 against the greenback. — A.M.C. Sy with Reuters