Peso sinks to over two-week low on Fed hike bets

THE PESO slumped to an over two-week low against the dollar on Wednesday as stronger-than-expected US economic data fueled hawkish US Federal Reserve bets, and amid continued uncertainty over the Middle East peace talks.

The currency sank by 20.1 centavos to close at P61.552 versus the greenback from P61.351 on Tuesday, based on Bankers Association of the Philippines data posted on its website.

This was its weakest close since June 8’s P61.69 and marked its sixth straight day of decline.

The local unit opened Wednesday’s session weaker at P61.40 per dollar. Its intraday best was at P61.35, while its low was at P61.63 against the greenback.

Dollars traded dropped to $1.76 billion on Wednesday from $2.31 billion on Tuesday.

Expectations of Fed rate hikes continued to drive demand for the greenback on Wednesday, supporting it against most Asian currencies, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The dollar-peso closed higher, fueled by strengthened hawkish Fed bets after upbeat US manufacturing PMI (purchasing managers’ index) data released overnight and continued uncertainty in the US-Iran peace negotiations,” a trader said by phone.

For Thursday, the trader expects the peso to move between P61.50 and P61.75 against the dollar, while Mr. Ricafort sees it ranging from P61.45 to P61.65.

The US dollar extended gains to reach a 13-month high against a basket of major currencies on Wednesday, as investors sought shelter from a tech stock sell-off and prepared for rate hikes from the Federal Reserve, Reuters reported.

Stock market volatility continued after a broad sell-off of technology and semiconductor sectors, sparking safe-haven demand for the dollar and bonds.

Meanwhile, expectations of a US rate hike continued to build, with Fed officials sounding increasingly hawkish as the economy remains strong.

Also supporting safe-haven demand, the US and Iran appeared to be at odds on some major aspects of their framework agreement.

The dollar index, which measures the greenback against a basket of major peers, climbed to a high of 101.69, the strongest level since May 2025. It was last up 0.2% on the day.

Markets are pricing in a 36% chance of an interest rate hike at the Fed’s July meeting, up from 9% a week ago, according to CME FedWatch. For September, the chance of a rate rise has risen above 70% from 29%. — Aaron Michael C. Sy with Reuters