Peso sinks to three-month low vs dollar --[Reported by Umva mag]

THE PESO depreciated to an over three-month low against the dollar on Monday as mixed US data last week caused markets to recalibrate their US Federal Reserve rate cut bets.

The local unit closed at P57.47 per dollar on Monday, weakening by 26.5 centavos from its P57.205 finish on Friday, Bankers Association of the Philippines data showed.

This was the peso’s worst close in over three months or since it finished at P57.515 per dollar on Aug. 7.

The peso opened Monday’s session weaker at P57.28 against the dollar. It traded lower than Friday’s close the entire day, with its intraday best at just P57.26, while its worst showing was at P57.50 versus the greenback.

Dollars exchanged dropped to $780.38 million on Monday from $1.33 billion on Friday.

“The peso continued to suffer after the US producer inflation report eased concerns of future US price pressures,” a trader said in an e-mail.

The dollar was generally stronger on Monday due to US economic data released last week and their impact on Fed rate expectations, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

For Tuesday, the trader said the peso could decline further with several Fed officials set to speak overnight.

The trader sees the peso moving between P57.35 and P57.60 per dollar, while Mr. Ricafort expects it to range from P57.35 to P57.55.

The dollar hovered near recent highs on Monday as investors digested China’s somewhat disappointing weekend stimulus announcements, Reuters reported.

The dollar index was just above 103 and closing in on last week’s peak, its highest since mid-August, on the back of traders reducing bets on further jumbo rate cuts by the Federal Reserve at its remaining policy meetings this year.

Last week’s US data showing slightly hotter-than-expected consumer inflation, but higher weekly jobless claims have left intact expectations for the Fed to cut rates by 25 basis points (bps) in November and December.

Fed Governor Christopher Waller — a supporter of a larger rate cut because he is worried the pace of price increases is undershooting the Fed’s target — was set to speak later on Monday.

US producer prices were unchanged in September as a small rise in the cost of services was offset by cheaper goods, pointing to a still-favorable inflation outlook and supporting views that the Federal Reserve would cut interest rates again next month.

The unexpected flat reading reported by the Labor department on Friday followed data on Thursday showing consumer prices increased slightly more than expected last month.

The unchanged reading in the producer price index (PPI) for final demand last month followed an unrevised 0.2% gain in August, the Labor department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast the PPI edging up 0.1%.

In the 12 months through September, the PPI increased 1.8% after climbing 1.9% in August. Consumer prices rose a bit above expectations in September, lifted by higher food costs.

Still, high prices continue to color consumers’ views of the economy. A separate survey from the University of Michigan on Friday showed its preliminary consumer sentiment index slipped to 68.9 in October from a final reading of 70.1 in September. Economists had forecast a preliminary reading of 70.8.

Consumers’ 12-month inflation expectations rose to 2.9% from 2.7% last month.

The Fed last month cut its policy rate by 50 bps to the 4.75%-5% range. It hiked rates by 525 bps in 2022 and 2023. — Aaron Michael C. Sy with Reuters

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