The peso falls; breaches 54:$1 | Company Applicant

UK think tank: peso will drop to 54 to the dollar this year

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The Philippine currency fell another peso against the U.S. dollar in just six trading days, closing at 54.065 against the greenback on Monday as markets absorbed deeper the “jumbo” rate hike the U.S. Federal Reserve announced. made last week.

The peso remains at its lowest level in three years and eight months since October 15, 2018, when it closed at 54.08, just as it was on Friday when it closed at 53.75: $1. The local currency only crossed the $53:1 mark on June 10.

“The peso was weaker against the US dollar for the seventh day in eight trading days, after recent weakness in other Asian currencies [following] the sharp 75bp US Fed rate hike and the continued hawkish signals from the US Fed,” said Michael Ricafort, RCBC Chief Economist.

“Markets are still digesting the price hike in Fed rate expectations, and global risk assets may struggle to post a sustainable rebound for now,” ING Bank added in a commentary.

“All of this should keep the dollar mostly in demand in a week where markets will focus on [Jerome] Powell’s testimony,” the bank said, referring to the chairman of the US Fed board of governors.

Powell will testify in the US Congress next week and is expected to explain how the US central bank will dig in to tame inflation towards its 2% target, mostly with more interest rate hikes in upcoming policy meetings.

Here, rates on short-term Treasury bills (T-bills) rose across the board on Monday as the market braced for a possible rate hike by the Bangko Sentral ng Pilipinas (BSP).

Price increase

Analysts said consumer price pressures stemming from the war in Ukraine were accelerating interest rate hikes to their highest level since the early 1990s, but the global food crisis could be nearing its peak.

By capping interest rates, the Treasury Board (BTr) raised only 10.5 billion pesos out of the 15 billion pesos (5 billion pesos from each of the three tenors) it had planned to raise. emit. Eligible dealers offered to lend a total of 22.6 billion pesos, 1.5 times more than the amount BTr wanted to borrow.

But as bid rates soared, the BTr only granted 3.07 billion pesos in benchmark 91-day treasury bills. The average yield on three-month debt rose to 1.759% from 1.572% last week.

BTr raised 3.62 billion pesos from 182-day IOUs at 2.132%, up from 1.934% previously.

The 364-day notes were allotted at an average annual rate of 2.454%, higher than last week’s 2.325%, so borrowing was capped at 3.85 billion pesos for the longest term of the notes. Treasure.

“As expected, markets have asked for a high premium to cushion the upward rate adjustments issued by the US Federal Reserve and which will be monitored by the Monetary Board on Thursday to ease mounting price pressures,” the national treasurer said. Rosalia de León.

“While incoming BSP Governor Felipe Medalla spoke of a gradual tightening, some analysts still see a 50 basis point (bp) move (Thursday) after the 75 basis point hike issued by the Fed ( Federal Reserve) to reduce inflation,” De Leon added.

Fitch Ratings noted that last week’s 75 basis point rise in the US federal funds rate was the biggest hike since 1994. It added that central banks in other major economies were tightening policy from extreme lows.

Maybank said while supply constraints caused a spike in local food inflation, there were signs the global food crisis could be nearing its peak.

On the one hand, fertilizer prices were approaching previous highs during the 2007-2008 food crisis, but began to decline in May.

Maybank added that: China’s embargo on fertilizer exports would end in June; Indonesia had lifted the ban on palm oil exports; Malaysia’s chicken ban would likely be short-lived; and rice prices were stable and ample supplies would help contain food prices.

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