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Peso sinks to new over 16-year low

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THE PESO ended weaker against the dollar on Wednesday as expectations of more monetary tightening from the US Federal Reserve amid rising inflation made the market more risk averse.

The local unit closed at P55.67 versus the dollar on Wednesday, sinking by 44 centavos from its Tuesday finish of P55.23, data from the Bankers Association of the Philippines’ website showed.

This was the local unit’s worst close in nearly 17 years or since it ended at P55.71 against the dollar on Oct. 20, 2005.

The peso opened Wednesday’s session at P55.42 against the dollar, which was also its intraday best. Its weakest showing for the day was at P55.72 versus the greenback.

Dollars exchanged went down to $1.245 billion on Wednesday from $1.285 billion on Tuesday.

“The peso exchange rate weaker versus the US dollar for the second straight day… amid a stronger US dollar versus major global currencies partly brought about by some risk aversion emanating from possible US economic slowdown or even recession amid more aggressive Fed rate hikes/monetary tightening in an effort to clamp down elevated US CPI (consumer price index) towards the long-term target of 2%, from the new 40-year high of 8.6% in May 2022,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Still, the peso was supported by lower global oil prices, gains in the local stock market, as well as hawkish signals from the Bangko Sentral ng Pilipinas chief on more rate hikes to curb rising inflation, Mr. Ricafort said.

A trader said the peso closed lower due to broad dollar strength amid fears of a recession in the US.

“All eyes will be on FOMC (Federal Open Market Committee) later,” the trader said, referring to the release of the minutes of the Fed’s June meeting overnight.

The dollar stood tall on Wednesday, holding at a 20-year peak against the euro and multi-month highs against other major peers as higher gas prices and political uncertainty renewed recession fears and sent investors scrambling to the safe-haven currency, Reuters reported.

For Thursday, Mr. Ricafort gave a forecast range of P55.50 to P55.75, while the trader said the peso could move from P55.50 to P55.80 against the dollar. — with a report from DGCR

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