Peso sinks to three-month low

THE PESO depreciated to a three-month low against the dollar on Monday ahead of the results of the US presidential elections and amid an expected uptick in domestic inflation last month.

The local unit closed at P58.34 per dollar on Monday, weakening by 24 centavos from its P58.10 finish on Thursday, Bankers Association of the Philippines data showed.

This was its worst finish in over three months or since it closed at P58.365 on July 31.

The peso opened Monday’s session sharply weaker at P58.27 against the dollar. Its intraday best was at P58.15, while its worst showing was at P58.36 versus the greenback.

Dollars traded declined to $1.18 billion on Monday from $1.3 billion on Thursday.

The market was closed on Friday (Nov. 1) for All Saints’ Day.

“The peso weakened anew, driven by safe-haven demand for the greenback ahead of the US elections this week,” a trader said in an e-mail.

The dollar slid on Monday as investors braced for a potential pivot this week for the global economy as the United States chooses a new leader, and as it likely cuts interest rates again with major implications for bond yields, Reuters reported.

The dollar fell 0.6% on the yen to 152.60. The dollar index eased 0.1% to 103.80.

US Treasury yields dropped 5 basis points (bps), retracing some of Friday’s surge.

Democratic candidate Kamala Harris and Republican Donald Trump remain virtually tied in opinion polls and the winner might not be known for days after voting ends.

Analysts believe Mr. Trump’s policies on immigration, tax cuts and tariffs would put upward pressure on inflation, bond yields and the dollar, while Ms. Harris was seen as the continuity candidate.

Dealers said the dip in the dollar might be linked to a poll that showed Ms. Harris taking a surprise 3-point lead in Iowa, thanks largely to her popularity with female voters.

Uncertainty over the outcome is one reason markets assume the Federal Reserve will choose to cut rates by a standard 25 bps on Thursday, rather than repeat its outsized half-point easing.

Traders have fully priced in a quarter-point cut to 4.5%-4.75%, and an 83% probability of a similar-sized move in December.

The peso weakened due to expectations of an uptick in October inflation, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

The Philippine Statistics Authority will release October inflation data on Tuesday (Nov. 5).

A BusinessWorld poll of 11 analysts yielded a median estimate of 2.4% for the October consumer price index, within the central bank’s 2-2.8% forecast for the month.

If realized, this would be faster than the 1.9% print in September but slower than 4.9% in the same month a year ago.

For Tuesday, the trader said the peso could depreciate further with the release of the October inflation report.

The trader sees the peso moving between P58.25 and P58.50 per dollar, while Mr. Ricafort expects it to range from P58.25 to P58.45. — AMCS with Reuters