Peso weakens to P61:$1 as US dollar strengthens on hawkish Fed signals

The Philippine peso depreciated for the fourth straight trading day to return to the P61:$1 level on Monday, as the US dollar strengthened after Federal Reserve officials hinted that interest rates could stay elevated.

The local currency shed 34.8 centavos to close at P61.123:$1 from last Friday’s finish of P60.775:$1.

“The US dollar/peso exchange rate corrected higher for most trading days since last week, after the stronger US dollar vs. major global currencies… after hawkish Fed signals recently, with most Fed officials estimating Fed rate hikes in the coming months,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said in a mobile message.

The Fed kept rates steady last week, but gave hawkish signals, driving bets on rate hikes. The Fed Fund futures are pricing in a possible 0.25 rate hike by October, and a total of 0.50 by March 2027.

Locally, the Bangko Sentral ng Pilipinas (BSP) hiked rates by 25 basis points, bringing the target reverse repurchase rate to 4.75%, the overnight deposit rate to 4.25%, and the overnight lending rate to 5.25%.

Ricafort also cited the performance of the local equities market on Monday, as the main Philippine Stock Exchange index (PSEi) lost 100.33 points or 1.64% to 6,035.02 at the closing bell. The broader All Shares index decreased by 39.69 points or 1.17% to 3,341.08.

More than 994.519 million shares, valued at P10.259 billion, changed hands. Decliners led advancers, 116 to 74, while 50 issues were unchanged.

“Overall, sentiment remained pressured by capital outflows and currency depreciation concerns,” Regina Capital Development Corp. head of sales Luis Limlingan said in a separate message. –NB, GMA News