Peso sinks to two-week low before US data

The peso declined to a two-week low against the dollar on Tuesday on expectations of strong US economic data, which may affect the US Federal Reserve’s policy decision this month.

The local unit closed at PHP 56.61 per dollar on Tuesday, weakening by 23 centavos from its PHP 56.38 finish on Monday, Bankers Association of the Philippines data showed.

This was the peso’s worst finish in more than two weeks or since it ended at PHP 56.64 against the greenback on Aug. 19.

The peso opened Tuesday’s session sharply weaker at PHP 56.50 against the dollar. Its intraday best was at PHP 56.45, while its weakest showing was at PHP 56.735 versus the greenback.

Dollars exchanged jumped to USD 1.83 billion on Tuesday from USD 802.6 million on Monday.

“The peso continued to weaken due to market positioning ahead of a likely strong US manufacturing purchasing managers’ index in August,” a trader said in an e-mail.

The peso was also dragged down by a stronger dollar due to expectations of a better US jobs data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar inched higher and held close to a two-week high on Tuesday as investors geared up for a slew of economic data, including Friday’s US payrolls, that could influence the size of an expected interest rate cut from the Fed, Reuters reported.

The dollar index, which measures the US currency against six rivals, was 0.11% higher at 101.77, just shy of the two-week high of 101.79 it touched on Monday. The index fell 2.2% in August on expectations of US rate cuts.

Investor focus this week will squarely be on the US payrolls data due on Friday after Fed Chair Jerome H. Powell last month endorsed an imminent start to interest rate cuts in a nod to the worries over the labor market.

Ahead of that, job openings data on Wednesday and the jobless claims report on Thursday will be in the spotlight.

Markets are pricing in a 69% chance of a 25-basis-point cut when the Fed meets on Sept. 17-18, with a 31% probability of a 50-bp cut, CME FedWatch tool showed.

For Wednesday, the trader sees the peso moving between PHP 56.45 and PHP 56.70 per dollar, while Mr. Ricafort expects it to range from PHP 56.50 to PHP 56.70. — A.M.C. Sy with Reuters