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Peso drops on bets on aggressive Fed hike

Peso drops on bets on aggressive Fed hike
THE PESO fell against the dollar on Monday as investors expect the US Federal Reserve to announce a major rate hike at its political meeting this week. – BW FILFOTO

The PESO weakened on Monday as the market positioned itself ahead of an expected rate hike from the US Federal Reserve at its meeting this week.

The local unit closed at P52,365 per dollar on Monday, losing 17.5 centavos from its P52.19 finish on Friday, based on Bankers Association of the Philippines data.

The peso opened Monday’s session at P52.25 against the dollar. Its weakest result was P52.40, while its best intraday was P52.22 versus the dollar.

Exchanged dollars fell to $ 840.7 million on Monday from $ 1.199 billion on Friday.

The peso fell as the market expects the Fed to raise interest rates again at its meeting this week, said chief economist Michael L. Ricafort of Rizal Commercial Banking Corp. in a Viber message.

Investors expect the Fed to raise interest rates by 50 basis points (bps) when it meets on April 3-4. May, and the uncertainty is around how high-minded Fed Chairman Jerome H. Powell will sound in the comments following the decision, Reuters reported.

Markets are pricing in an aggressive series of rate hikes by the Fed as it seeks to tame rising inflation in the midst of the ongoing Russia-Ukraine crisis, continued downturns in China and soaring global commodity prices.

The Fed began its tightening cycle at the March meeting, raising borrowing costs by 25 bps.

Sir. Ricafort said losses in the local stock market also caused the peso to fall.

Shares continued to fall on Monday ahead of the Fed’s political meeting and the release of Philippine inflationsdata.

The leading Philippine stock market index fell 10.17 points or 0.15% to close at 6,721.08, while the broader all-share index fell 8.31 points or 0.23% to 3,596.83.

Meanwhile, a trader said in an email that the peso was weakening after stronger-than-expected U.S. data on personal spending.

The U.S. Department of Commerce said Friday that consumer spending, which accounts for more than two-thirds of the economy, rose 1.1 percent in March. This is faster than the 0.7% forecast from economists polled by Reuters.

Meanwhile, the price index for private consumption rose by 6.6% in March, the fastest pace since January 1982.

Philippine financial markets closed Tuesday, according to Eid’l Fitr.

For Wednesday, Mr. Ricafort gave a forecast range of P52.22 to P52.42 per. dollars, while the retailer expects the local unit to move within P52.25 to P52.45. – LWT Noble with Reuters

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