Peso down as market awaits Fed hints

The peso declined anew against the dollar on Thursday amid bets on the US Federal Reserve’s next policy move.

The local unit closed at PHP 55.965 per dollar on Thursday, weakening by 8.5 centavos from its PHP 55.88 finish on Wednesday, Bankers Association of the Philippines data showed.

The peso opened Thursday’s session weaker at PHP 56.05 against the dollar. Its intraday best was at PHP 55.94, while its worst showing was at PHP 56.09 versus the greenback.

Dollars exchanged went down to USD 1.37 billion on Thursday from USD 1.54 billion on Wednesday.

“The peso tracked the dollar’s recovery last night due to aggressive Fed bets and lower US PCE (personal consumption expenditure) expectations,” the first trader said in a phone interview on Thursday.

“The peso depreciated due to market caution ahead of key US economic data releases on durable goods and initial jobless claims overnight,” the second trader said in an e-mail.

For Friday, the second trader said the peso could recover amid a likely softer US PCE report and potentially dovish remarks from Fed Chair Jerome H. Powell.

The first trader sees the peso moving between PHP 55.70 and PHP 56.10 per dollar, while the second trader expects it to range from PHP 55.85 to PHP 56.10

The dollar held firm on Thursday following its sharpest rally since early June as traders looked ahead to speeches from key Federal Reserve policy makers later in the day for clues on the pace of interest rate cuts, Reuters reported.

The US currency rebounded strongly overnight from a more than one-year low to the euro and 2 1/2-year trough versus sterling.

While there was no obvious catalyst for the rebound, investors appeared to take a more nuanced view on just how aggressive future US rate reductions would be, with Fed speakers this week not presenting a unified view on the path forward.

Later on Thursday, Mr. Powell was set to give pre-recorded remarks at a conference in New York, where New York Fed President John Williams was also set to speak. Boston Fed President Susan Collins and Fed Governors Michelle Bowman and Lisa Cook were set to take to the podium at various other venues as well.

Traders still expect a second super-sized 50-basis-point rate reduction at the Fed’s next meeting in November, but the odds edged down to 57.4% from 58.2% a day earlier, according to the CME Group’s FedWatch Tool.

The dollar index, which measures the currency against the euro, sterling, yen and three other major peers, eased 0.10% to 100.84 as of 0444 GMT, following a 0.57% jump on Wednesday, its biggest one-day gain since June 7.

The yen hit a three-week low of 145.04 per dollar and last fetched 144.77. — A.M.C. Sy with Reuters