THE PESO declined against the dollar on Tuesday as some US Federal Reserve policy makers said they may need to keep rates steady for now due to elevated inflation.
The local unit closed at P58.15 versus the greenback on Tuesday, weakening by 12 centavos from its P58.03 finish on Monday, Bankers Association of the Philippines data showed.
The peso opened Tuesday’s trading session weaker at P58.08 against the dollar, which was already its intraday best. Meanwhile, it dropped to as low as P58.285 versus the greenback.
Dollars exchanged rose to $1.67 billion on Tuesday from $1.16 billion on Monday.
The peso depreciated on broad dollar strength following hawkish comments from Fed officials, a trader said in a phone interview.
For Wednesday, the trader expects the peso to move between P58 and P58.40 per dollar, while Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort sees it ranging from P58.05 to P58.25.
The dollar firmed on Tuesday as traders weighed tariff worries and the path to US rate cuts, Reuters reported.
Investor focus this week will be on Wednesday’s release of minutes of the Federal Reserve’s meeting in January to gauge how policy makers have sought to weigh the risk of a broader tariff war in the wake of President Donald J. Trump’s trade policies.
Data last week showed US consumer prices increased at the fastest pace in nearly 18 months in January, reinforcing the Fed’s message that it was in no rush to resume cutting rates amid growing economic worries.
The dollar index, which measures the greenback against six other major currencies, was 0.27% higher at 107.01, still not far from the two-month low of 106.56 it touched on Friday.
Federal Reserve Governor Michelle Bowman said on Monday she wanted increased conviction that inflation will decline further this year before lowering interest rates again, particularly given uncertainty around the impact of the Trump administration’s new trade and other policies, Reuters reported.
Meanwhile, Federal Reserve Bank of Philadelphia President Patrick Harker sounded an upbeat note on the state of the US economy on Monday, and said he saw no reason to change interest rate policy right now as the central bank continued to work to lower inflation levels.
For his part, Federal Reserve Governor Christopher Waller said his “baseline” view is that the Trump administration’s new tariffs will have only a modest impact on prices that the central bank should try to look through in setting monetary policy.
As it stands “the data are not supporting a reduction in the policy rate,” Mr. Waller said. “But if 2025 plays out like 2024, rate cuts would be appropriate at some point this year.”
The Fed at its March meeting is expected to hold its benchmark interest rate steady at the current range of 4.25% to 4.5%. — A.M.C. Sy with Reuters
