Peso jumps on dovish Fed, trade woes

The peso strengthened against the dollar on Wednesday following rate cut signals from US Federal Reserve Chair Jerome H. Powell and trade tensions between the United States and China.

The local unit closed at PHP 58.055 versus the greenback, jumping by 16 centavos from its PHP 58.215 finish on Tuesday, Bankers Association of the Philippines data showed. This was its best close in over week.

The peso opened Wednesday’s session stronger at PHP 58.10 versus the dollar. Its intraday best was at PHP 57.985, while its worst showing was at PHP 58.15 against the greenback.

Dollars exchanged increased to USD 1.73 billion on Wednesday from USD 1.52 billion on Tuesday.

“The dollar-peso closed lower on dovish signals from the Fed and escalating trade tensions between US and China,” a trader said in a phone interview.

The US dollar slipped against a basket of peers on Wednesday after comments from Mr. Powell bolstered bets on a series of rate cuts in coming months, while a broader improvement in risk sentiment took the shine off the greenback, Reuters reported.

The dollar index, which measures the US currency against six major peers, fell 0.3% to 98.796 as of 0806 GMT, extending a 0.2% decline from the prior session.

Mr. Powell in a speech on Tuesday left the door open to rate cuts by saying the US labor market remained mired in low-hiring, low-firing doldrums. He said the absence of official economic data due to the government shutdown has not prevented policymakers from being able to assess the economic outlook, at least for now.

Markets are currently priced for a quarter-point cut at the Oct. 28-29 Fed gathering and another at the following meeting in December, followed by three more cuts next year, according to LSEG data.

US Trade Representative Jamieson Greer helped to calm some nerves on Tuesday when he told CNBC that there was still a plan for President Donald J. Trump to meet with Chinese leader Xi Jinping.

The peso was also supported by data showing continued growth in remittances, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Cash remittances coursed through banks inched up by 3.2% year on year to USD 2.977 billion in August, central bank data showed.

For Thursday, the trader sees the peso moving between PHP 57.90 and PHP 58.20 per dollar, while Mr. Ricafort expects it to range from PHP 57.95 to PHP 58.15. — Aaron Michael C. Sy with Reuters