Peso pierces 53 to $1 after softer US rate hike

MANILA, Philippines — The peso yesterday pierced the 53 to $1 mark to hit its strongest level in more than seven months as it joined other currencies in cheering the softer 25-basis-point hike delivered by the US Federal Reserve that signals a possible end to the interest rate hiking cycle.

The local currency gained 63 centavos to close at 53.845 yesterday from Wednesday’s 54.475. It opened stronger at an intraday low of 54.20 before gaining steam to hit an intraday high of 53.835.

Trading volume jumped by 69 percent to $1.62 billion from $958.9 million last Wednesday.

China Bank chief economist Domini Velasquez said US Fed Chairman Jerome Powell’s remarks early yesterday drove the US dollar lower as markets deemed the statement on the dovish side.

“Although Powell’s message remained consistent with December’s (i.e., no cut in 2023), currently the markets still see one last rate hike in March and a possible cut by September. An early pivot of the Fed will likely further weaken the US dollar this year, possibly until next year,” Velasquez said.

It is believed that the US central bank is nearing the end of its rate hike campaign and was more dovish at yesterday’s meeting.

“Globally, it looks like in many countries, inflation has peaked, providing support for emerging markets’ currencies,” Velasquez said.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the peso was at its strongest level since June 17, 2022 when it closed at 53.75 to $1.

Ricafort attributed the strengthening of the peso to the continued weakness of the US dollar against major global currencies.

The dollar hit new nine-month lows after the widely expected but smaller Fed rate hike of 25 basis points.

Ricafort said the peso also strengthened after the announcement on the upcoming retail Treasury bond (RTB) offering on Feb. 7 that could attract some of the excess liquidity/investments from the financial system along with some foreign investments, as well as some improvement in the latest outstanding national government debt data as of December 2022.

Since the start of 2023, the peso has already strengthened by P1.91 or 3.4 percent from the end-2022 level of 55.755 to $1.

Ricafort said the immediate resistance level is the 54 psychological mark, while the next minor resistance levels over the past three months is at 55.10-55.80.

UnionBank chief economist Ruben Carlo Asuncion said the weakness of the greenback from last night’s US Fed hike was received by the market as largely dovish.

“I believe it was a major mover of the dollar-peso exchange. Sensing that the end of the Fed’s rate hike cycle is near, the markets pounced on the opportunity. Selling momentum prompted prices to breach the critical 54 support. Nevertheless, dollar-peso rate price drops were only temporarily halted by suspected BSP bids,” Asuncion told The STAR.

The peso slumped by as much as 15.7 percent to hit an all-time low of 59 to $1 due to the aggressive rate hikes delivered by the US Fed to fight persistently high inflation.

Amid the aggressive rate hikes delivered by the Bangko Sentral ng Pilipinas to tame inflation and stabilize the peso, the local currency ended 2022 weaker by 9.3 percent to 55.755 from the end-2021 level of 50.999.