The peso fell to 50-a-dollar Tuesday, the weakest in more than two months, as investors sought the safety of the greenback after New York Fed president William Dudley hinted the US central bank might continue to increase interest rates.
The peso dropped from 49.91 a dollar Monday to close at 50.10 Tuesday, its lowest finish since it settled at 50.08 on April 7, 2017. Total volume traded reached $1.155 billion, higher than $572 million previously.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the peso’s weakness was a reaction to external developments particularly the hawkish statements of Fed officials overnight. “So all regional currencies have responded the same way. We are just moving with other regional currencies,” Tetangco said.
Tetangco said Bangko Sentral’s policy was not to go against the fundamental trend and minimize the sharp fluctuation and volatility.
Reports quoted Dudley, a close ally of Fed Chair Janet Yellen, as saying that US inflation was a bit low but should rise alongside wages as the labor market continued to improve, allowing the Federal Reserve to continue gradually tightening US monetary policy.
Security Bank Corp. said in its daily market report that the US dollar resumed its ascent as Dudley echoed the hawkishness of Fed Chair Yellen’s statement last week.
“Dudley is generally satisfied with the direction of the US economy, being optimistic on wage growth following suit on tightening labor market,” it said.
The peso closed at 49.72 to a dollar on the last trading day of 2016. It posted its weakest level in 10 years at 50.40 against the greenback on March 3, 2017, driven by domestic factors such as the possible repercussions from other countries to Congress’ passage of death penalty law and the market expectation that larger fiscal deficit spending would widen the trade deficit and bring the current account to a deficit.
The Cabinet-level Development Budget Coordination Committee kept the peso-dollar exchange rate this year at 48 to 50 a dollar. DBCC’s forecast for 2018 to 2022 was adjusted to 48 to 51 a dollar.