Peso slips versus dollar as markets eye Fed policy path

The peso slipped against the dollar on Monday as markets keep a close eye on the US Federal Reserve, with data showing it could keep rates steady but with fresh attacks by US President Donald J. Trump on Fed Chair Jerome H. Powell threatening its independence.

The local unit closed at PHP 59.26 versus the greenback, declining by 1.5 centavos from its PHP 59.245 finish on Friday, data from the Bankers Association of the Philippines data showed.

The peso opened Monday’s trading session slightly stronger at PHP 59.22 versus the dollar. Its intraday best was at PHP 59.17, while its weakest showing was at PHP 59.28 against the greenback.

Dollars traded fell to USD 887.3 million from USD 1.23 billion on Friday.

“The local currency continued to weaken after the latest US labor reports broadly narrowed the probability of a US rate cut,” a trader said in an e-mail.

The Bureau of Labor Statistics monthly report showed 50,000 workers were added to nonfarm payrolls in December, compared with expectations in a Reuters poll for a rise of 60,000, just above November’s downwardly revised increase of 56,000. The unemployment rate eased, as expected, to 4.4%.

Threats to the Fed’s independence and geopolitical concerns also affected foreign exchange markets, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Tuesday, the trader said the peso could depreciate further as US consumer inflation is expected to remain steady for December, which could solidify views that the Fed will hold borrowing costs steady this month.

The trader sees the peso moving between PHP 59.10 and PHP 59.35 per dollar on Tuesday, while Mr. Ricafort expects it to range from PHP 59.15 to PHP 59.35.

The dollar on Monday fell sharply against the euro and the Swiss franc while edging lower versus the Japanese yen after the Trump administration threatened Mr. Powell with a criminal indictment, a move that could endanger the greenback’s safe-haven status.

The dollar index, which measures the greenback’s strength against a basket of six currencies, was recently 0.37% lower at 98.759, snapping a five-day winning streak.

Some analysts said markets had not yet panicked because they expect Mr. Trump to appoint a credible successor to Mr. Powell and let that person steer policy.

The Swiss franc was the best performer on Monday, rising 0.52% to 0.7968 against the dollar, while the euro continued to benefit as US politics triggered a sell-off in American assets. The single currency rose 0.44% to 1.1688 in its biggest daily rise since Dec. 10.

The dollar advanced in early Asian trade to a one-month high after Friday’s jobs report bolstered expectations that the Federal Reserve will hold interest rates steady later this month, while reports of hundreds of deaths during protests in Iran heightened geopolitical tensions and stoked demand for safe-haven assets.

Against the yen, the US dollar was recently 0.1% weaker at 157.80 yen, not far from its highest point in a year.

Geopolitical tensions in Iran “should be positive for the US dollar but we haven’t seen any upside there yet,” said Kyle Rodda, senior market analyst at Capital.com in Melbourne. “The question from here is whether the momentum behind the protest movement continues and whether the regime cracks down even harder, opening the door to some US involvement.”

Mr. Trump said the US might meet Iranian officials and was in contact with the opposition, as he weighed a range of responses including military options.

Financial markets are preparing for a busy data calendar this week, with Tuesday’s release of the US consumer price index for December providing one of the last key economic releases before the Fed’s next monetary policy meeting at the end of January.

A ruling from the US Supreme Court on the legality of Mr. Trump’s emergency tariffs could also be released as soon as Wednesday. The US Treasury has more than adequate funds to pay any tariff refunds ordered if the Supreme Court rules against Trump’s emergency tariffs, US Treasury Secretary Scott Bessent said on Friday. — A.M.C. Sy with Reuters