Peso back at PHP 56 level on Fed cut bets

The peso rebounded to the PHP 56-per-dollar level on Wednesday as July US consumer price index (CPI) data supported bets of a September rate cut by the US Federal Reserve.

The local unit closed at PHP 56.72 per dollar, strengthening by 35.5 centavos from its PHP 57.075 finish on Tuesday, Bankers Association of the Philippines data showed.

This was the peso’s strongest close in almost three weeks or since its PHP 56.65 finish on July 25, which was also the last time it closed at the PHP 56-per-dollar level.

The peso opened Wednesday’s session stronger at P56.88 against the dollar. Its intraday best was its closing level of PHP 56.72, while its worst showing was at PHP 57.01 against the greenback.

Dollars exchanged went down to USD 1.63 billion on Wednesday from USD 1.83 billion on Tuesday.

The peso appreciated as “the dollar weakened following softer-than-expected US inflation data,” a trader said in a phone interview.

For Wednesday, the trader sees the peso moving between PHP 56.50 and PHP 56.90 per dollar.

The dollar fell to a two-week low on Wednesday after a tame reading on US inflation bolstered expectations of a Federal Reserve rate cut next month, with US President Donald J. Trump’s attempts to extend his grip over US institutions also undermining the currency, Reuters reported.

The dollar index, measuring the currency against a basket of peers, dipped to 97.76, its lowest since July 28, extending its 0.5% fall on Tuesday.

US consumer prices increased marginally in July, data showed on Tuesday, in line with forecasts and as the pass-through from Trump’s sweeping tariffs to goods prices has so far been limited.

Investors eyeing imminent Fed cuts cheered the data and moved to price in a 98% chance the central bank would ease rates next month, according to LSEG data.

“US CPI release turned out to be a dollar-negative event,” said Francesco Pesole, strategist at ING. “The September Fed cut remains firmly priced in.”

He added that core inflation accelerating is far from ideal, but not alarming enough to overshadow the deterioration in the jobs market.

Also eroding investor confidence in the dollar were Mr. Trump’s fresh attempts to undermine Fed independence, after White House spokeswoman Karoline Leavitt said on Tuesday that the US president was considering a lawsuit against Fed Chair Jerome H. Powell in relation to his management of renovations at the central bank’s Washington headquarters.

Mr. Trump has been at loggerheads with Mr. Powell and has repeatedly lambasted the Fed chair for not easing rates sooner. — AMCS with Reuters