THE PESO dropped further to hit a near three-week low against the dollar on Thursday as strong US labor data fanned bets that the US Federal Reserve would keep rates unchanged at their meeting this month.

The local unit closed at P58.50 per dollar on Thursday, weakening by 10.5 centavos from its P58.395 finish on Wednesday, Bankers Association of the Philippines data showed.

This was its weakest finish in nearly three weeks or since it closed at P58.81 per dollar on Dec. 20, 2024.

The peso opened Thursday’s session weaker at P58.45 against the dollar. Its intraday best was at P58.333, while it dropped to as low as P58.62 versus the greenback.

Dollars exchanged rose to $1.83 billion on Thursday from $1.74 billion on Wednesday.

The peso declined against the dollar as the market reacted to US initial jobless claims data, a trader said by phone.

Strong US data supported the dollar’s rise, which weighed on the peso, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Friday, the trader sees the peso moving between P58.30 and P58.60 per dollar, while Mr. Ricafort expects it to range from P58.40 to P58.60.

The number of Americans filing new applications for unemployment benefits fell to an 11-month low last week, pointing to a stable labor market, though a slowdown in hiring has led some laid-off workers to experience long bouts of joblessness, Reuters reported.

Signs of a steadily cooling labor market could allow the Federal Reserve to keep interest rates unchanged in January against the backdrop of still high inflation.

The US central bank last month projected a shallower path of rate cuts this year than had been forecast in September, when it launched its policy easing cycle.

Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 201,000 for the week ended Jan. 4, the lowest level since February 2024, the Labor department said on Wednesday. Economists polled by Reuters had forecast 218,000 claims for the latest week.

Minutes of the Fed’s Dec. 17-18 meeting published on Wednesday showed policy makers viewed labor market conditions as “gradually easing,” and saw “no signs of rapid deterioration.” They, however, noted “that labor market indicators merited close monitoring.”

Labor market stability was underscored by government data on Tuesday showing an increase in job openings in November, with 1.13 vacancies for every unemployed person, up from 1.12 in October. Uncertainty over the impact of proposed policies from President-elect Donald J. Trump’s incoming administration is also seen causing the Fed to pause rate cuts this month.

US Treasury prices fell, with the yield on the 10-year note rising to the highest level since April. Stocks on Wall Street declined in response, while the dollar gained versus a basket of currencies.

The central bank lowered its benchmark overnight interest rate by 25 basis points to the 4.25%-4.50% range last month.

The Fed, however, projected only two rate cuts this year compared to the four it had forecast in September. The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation. — A.M.C. Sy with Reuters