Peso jumps to one-month high as dollar struggles after weak jobs data

The peso jumped to an over one-month high against the dollar on Monday as weak US jobs data boosted hopes of a rate cut by the US Federal Reserve next week.

The local unit closed at PHP 56.69 per dollar, strengthening by 22.5 centavos from its PHP 56.915 finish on Friday, Bankers Association of the Philippines data showed.

This was the peso’s best finish in more than a month or since it ended at PHP 56.65 on July 24.

The peso opened Monday’s session stronger at PHP 56.777 versus the dollar. Its intraday best was at PHP 56.67, while its worst showing was at PHP 56.93 against the greenback.

Dollars exchanged went down to USD 1.32 billion on Monday from USD 1.62 billion on Friday.

“The dollar-peso closed lower as the market responded to the weak US NFP (nonfarm payrolls) release last Friday, which bolstered expectations that the Fed will cut rates this month,” a trader said in a phone interview.

The dollar was generally weaker on Monday following the decline in global crude oil prices and US Treasury yields, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

For Tuesday, the trader sees the peso moving between PHP 56.50 and PHP 56.90 per dollar, while Mr. Ricafort expects it to range from PHP 56.55 to PHP 56.80.

The dollar remained on shaky ground on Monday after Friday’s weak US jobs report, which cemented expectations of a Federal Reserve rate cut this month, Reuters reported.

The dollar struggled to recoup its heavy losses after falling sharply on Friday on data that showed further cracks in the US labor market.

The nonfarm payrolls report showed US job growth weakened sharply in August and the unemployment rate increased to nearly a four-year high of 4.3%.

Investors ramped up bets of an outsized 50-basis-point rate cut from the Fed later this month following the release and are now pricing in a 10% chance of such a move, as compared to none a week ago, according to the CME FedWatch tool.

The dollar index edged down 0.2% to 97.7, having tumbled more than 0.5% on Friday.

“(The payrolls report) has resulted in the dollar index falling back below support at the 98.000-level although the negative impact on the US dollar is more modest than implied by the drop in short-term US yields,” MUFG currency strategist Lee Hardman said in a note.

“The weak nonfarm payrolls report for August has reinforced expectations that the Fed will resume cutting rates this month, and has even encouraged expectations that they could begin with a larger 50-bp rate cut similar to last September.” — A.M.C. Sy with Reuters