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Peso sinks on higher debt, Fed hike bets


THE PESO sank against the dollar on Thursday as the government’s outstanding debt ballooned to P12.76 trillion as of April and due to continued hawkish signals from US Federal Reserve officials.

The local unit closed at P52.80 on Thursday, shedding 32 centavos from its P52.48 finish on Wednesday, Bankers Association of the Philippines data showed.

The peso opened Thursday’s session slightly weaker at P52.47 against the dollar. Its weakest showing was at P52.80, which was also its close, while its intraday best was at P52.455 versus the greenback.

Dollars exchanged increased to $1.1 billion on Thursday from $724.22 million on Wednesday.

The peso weakened following the release of latest data on the National Government’s outstanding debt, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The government’s outstanding debt was at P12.76 trillion at end-April, due to the net issuance of securities and a weaker peso, the Bureau of the Treasury (BTr) said on Thursday.

Preliminary data from the BTr showed outstanding debt climbed 16.1% from P10.99 trillion in the same month a year ago and by 0.7% from the March level of P12.68 trillion.

“The peso finally broke the P52.50-level today as the US Federal Reserve started its plan to unload its asset purchases this month and lingering Fed rate hike expectations,” a trader said in an e-mail on Thursday.

Stronger US economic data could also support continued aggressive monetary tightening from the Fed amid hawkish signals from Fed officials, Mr. Ricafort added.

The Fed began shrinking asset holdings built up during the pandemic on Wednesday. Traders expect it will raise rates by 50 basis points at meetings this month to make a dent in an inflation rate running more than three times its goal, Reuters reported.

San Francisco Federal Reserve Bank President Mary Daly said on Wednesday that the Fed should hike interest rates up to a level that no longer stimulates the economy.

“I see a couple of 50-basis-point hikes immediately in the next couple of meetings to get there. And then we need to look around and see what else is going on,” Ms. Daly said in a CNBC interview.

For Friday, the peso might rebound on profit taking after Thursday’s decline.

Mr. Ricafort expects the peso to move between P52.60 and P52.90 versus the dollar on Friday, while the trader expects a range of P52.65 to P52.85. — K.B. Ta-asan with Reuters

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