Peso climbs to over one-month high as dollar drops on Fed concerns

The peso rose to an over one-month high on Monday as the dollar was dragged lower by concerns over the impending change in leadership at the US Federal Reserve.

The local unit climbed by 15.5 centavos to close at PHP 58.49 versus the greenback from its PHP 58.645 finish on Friday, Bankers Association of the Philippines data showed.

This was the peso’s best close in over a month or since it ended at PHP 58.41 on Oct. 22.

The local unit opened Monday’s session slightly stronger at PHP 58.63 per dollar. Its weakest showing was at PHP 58.68, while its intraday best was its closing level.

“The peso appreciated today after reports surfaced that the current director of the US National Economic Council Kevin Hassett is rumored to be appointed as the next Fed chief by President Donald J. Trump,” a trader said in a Viber message.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message that growing bets of a Fed cut at their Dec. 9-10 meeting also caused the dollar to weaken.

The dollar began December on the back foot as investors braced for a pivotal month that could bring the Federal Reserve’s final rate cut of the year and the confirmation of a dovish successor to Chair Jerome H. Powell, Reuters reported.

Traders are now pricing in an 87% chance the Fed will cut by 25 basis points when it meets next week, according to the CME FedWatch tool.

What is less clear cut is what happens after December. Money markets right now show very little chance of another cut much before the spring and some analysts believe December might even yield a “hawkish cut” — trader-speak for a cut accompanied by indications from policymakers that another near-term fall in borrowing costs may not be forthcoming.

Either way, with investors assuming a December cut is close to a done deal, alongside a report that White House economic adviser Mr. Hassett could be the next Fed chair, the dollar is struggling, having clocked its worst weekly performance against a basket of major currencies in four months last week.

US Treasury Secretary Scott Bessent said there was a good chance Mr. Trump would announce his pick before Christmas.

The peso also rose amid the anticipated seasonal increase in remittances for the holidays, Mr. Ricafort added.

For Tuesday, the trader sees the peso moving between PHP 58.35 and PHP 58.60 per dollar, while Mr. Ricafort expects it to range from PHP 58.35 to PHP 58.65. — ARAI with Reuters