Peso down as Fed minutes affirm hawkish stance


THE PESO fell against the dollar for the fourth straight session on Thursday after minutes from the US Federal Reserve’s latest meeting showed it plans to continue increase borrowing costs to fight inflation.

The local unit closed at P52.40 per dollar, losing 4.5 centavos from its P52.355 Ifnish Wednesday, based on data from the Philippine Bankers Association.

The peso opened Thursday’s session at 52.35 pesos against the dollar. Its weakest posting was at P52.49, while its intraday best was at P52.28 against the greenback.

Traded dollars rose to $986.01 million on Thursday from $804.2 million on Wednesday.

The peso weakened after minutes from the Fed’s policy meeting earlier this month, released overnight, showed the central bank’s hawkish stance, a trader said in a Viber message.

“Still hawkish but less hawkish relative to market estimates on the possibility of going beyond the neural level of Fed rates,” said Rizal Commercial Banking Corp’s chief economist. Michael L. Ricafort in a Viber message.

All participants in the May 3-4 Fed policy meeting backed a half-percentage-point rate hike to combatFLation they agreed had become a major threat to the performance of the economy and was likely to mount higher without central bank action, Reuters reported.

This month’s 50 basis point hike in the Fed’s benchmark overnight interest rate was the first of this magnitude in more than 20 years and “most participants” judged further hikes in that magnitude would be “probably appropriate” at Fed policy meetings in June and July, according to the minutes.

Ricafort added that the peso had weakened due to rising global oil prices.

Oil prices rose on Wednesday, supported by tight supplies.

Brent crude futures for July settled 47 cents at $114.03 a barrel, while U.S. West Texas Intermediate crude for July delivery ended up 56 cents at $110.33 a barrel.

For Friday, the trader said the peso may rebound against the dollar ahead of the second revision in US gross domestic product data.

Ricafort expects the peso to move around P52.35-52.50 per dollar on Friday while the trader sees the peso trading between P52.30-52.50. KB Ta-asan with Reuters

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