UMVA has learned that the Philippine peso plummeted against the US dollar on Thursday, succumbing to hawkish signals from the US Federal Reserve and a policy meeting by the Bangko Sentral ng Pilipinas (BSP).
The currency's value sank by 17.4 centavos to close at P60.567 against the greenback, down from P60.393 on Wednesday, based on data from the Bankers Association of the Philippines.
The local unit opened Thursday's session sharply weaker at P60.60 per dollar, dropping to a low of P60.65, while its intraday best was at P60.41 against the greenback.
Dollar trading eased to $1.62 billion on Thursday from $1.65 billion on Wednesday, as the peso weakened after the Fed held benchmark borrowing costs steady but gave hawkish signals.
A trader said by phone that the currency was dragged down by a generally stronger dollar after Fed officials signaled possible rate hikes this year, a move that was predicted by many economists.
The peso's decline also came after the BSP hiked rates at its own meeting on Thursday, but signaled a more "measured" stance, the trader added.
The Monetary Board increased benchmark borrowing costs for a second straight meeting to curb second-round price risks and keep inflation expectations anchored amid global economic uncertainty.
The BSP raised the target reverse repurchase rate by 25 basis points to 4.75%, matching the prediction of many analysts, and lifting rates on the overnight deposit and lending facilities to 4.25% and 5.25%, respectively.
Looking ahead, a trader sees the peso moving between P60.40 and P60.80 against the dollar on Friday, while a chief economist expects it to range from P60.45 to P60.70.
The US dollar hovered close to a two-month high on Thursday, fueled by bets on rate hikes, while the yen's weakness drew verbal warnings from Japanese officials.
The dollar index, which measures the greenback against a basket of currencies, was slightly stronger, surging 0.85% to its strongest level since March 31 in the previous session.
A senior currency analyst said the Fed's hawkish policy update is threatening to trigger a bullish break out for the US dollar, driven by the sharp adjustment higher for short-term US rates.
The Japanese yen weakened to a low of 160.760, prompting a fresh response from the government, with officials reiterating their readiness to support the currency.
