Peso climbs on BSP, Fed rate cut hopes

The peso gained against the dollar on Monday on expectations of rate cuts from both the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve.

The local unit closed at PHP 57.04 per dollar, rising by seven centavos from its PHP 57.11 finish on Friday, Bankers Association of the Philippines data showed.

The peso opened Monday’s session stronger at PHP 56.87 against the dollar, which was also its intraday best. Its worst showing was at PHP 57.10 against the greenback.

Dollars traded went down to USD 2.19 billion on Monday from USD 2.46 billion on Friday.

“The dollar-peso initially opened lower, tracking dollar weakness over the weekend due to the Fed staff developments, but rallied after BSP Chief Remolona said that two more rate cuts are more likely for 2025,” the first trader said in a phone interview.

The Philippine central bank signaled on Monday it may deliver the first of two remaining interest rate cuts this year at its Aug. 28 policy meeting as inflation remained subdued, Reuters reported.

BSP Governor Eli M. Remolona, Jr. said it was “quite likely” the bank would lower its key policy rate later this month, reiterating its easing bias to support growth amid global uncertainties and as inflation continues to slow.

“Things look good,” Mr. Remolona told a forum organized by the Economic Journalists Association of the Philippines, adding that inflation could fall to 2% this year, the bottom of the BSP’s target range.

Mr. Remolona told Reuters on July 28 the BSP was on track to cut rates two more times in 2025. After this month’s meeting, the BSP will have two more policy meetings before yearend.

“The peso appreciated amid growing expectations of a September Fed rate cut after the Trump economic team hinted at potentially considering current Fed Governor Chris Waller as the successor of Jerome Powell as Chairman of the US Federal Reserve,” the second trader said in an e-mail.

US Treasury Secretary Scott Bessent is leading a search for a successor to Fed Chair Jerome H. Powell, with an expanded list that includes a longtime economic consultant and a past regional Fed president, a source familiar with the process told Reuters on Friday.

The list includes St. Louis Fed President James Bullard and Marc Sumerlin, a former economic adviser to President George W. Bush, the source said, confirming an earlier report by the Wall Street Journal that said there were now about 10 contenders for the spot. President Donald J. Trump said he had narrowed the list to four.

National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh remain under consideration, along with current Fed Governor Christopher Waller, the source told Reuters.

Mr. Trump has pressured Mr. Powell all year to cut interest rates, building on his past comments critical of the Fed chief that emerged during his first term as president shortly after he elevated Mr. Powell to the Fed chair role. Mr. Powell’s term ends in May. Critics have said the president should let Fed chair Mr. Powell complete his term without interference.

Mr. Hassett, Mr. Warsh and Mr. Waller have all signaled support for lower rates, which Mr. Trump had indicated would be a requirement for the job.

For Tuesday, the second trader said the peso could weaken anew before the release of July US consumer inflation data.

The first trader sees the peso moving between PHP 56.90 and PHP 57.30 per dollar on Tuesday, while the second trader expects it to range from PHP 56.95 to PHP 57.20. — A.M.C. Sy with Reuters