Peso may be range-bound as mart awaits policy hints from Fed chief

The peso could continue to move sideways against the dollar this week as markets monitor developments at the US Federal Reserve as the Trump administration continues to pressure the central bank to cut interest rates.

On Friday, the local unit closed at PHP 57.065 per dollar, weakening by 12 centavos from its PHP 56.945 finish on Thursday, data from the Bankers Association of the Philippines showed.

Meanwhile, week on week, the peso inched up by 4.5 centavos from its PHP 57.11 close on Aug. 8.

The peso dropped on Friday as the dollar gained early in the session on faster-than-expected July US producer inflation data, which tempered Fed rate cut expectations, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The dollar-peso closed higher after stronger than expected US producer price inflation (PPI) data brought down Fed cut bets,” a trader likewise said in a phone interview on Friday.

The dollar held on to previous session gains early on Friday after hotter-than-expected inflation data prompted traders to trim wagers on rate cuts by the Fed, Reuters reported.

Overnight, markets had to contend with US producer prices showing the quickest rise in three years in July amid a surge in the costs of goods and services, pointing to a broad pick up in inflationary pressures which analysts say could pose a dilemma for the Fed.

The hot measure of producer price inflation followed a comforting consumer inflation outcome earlier in the week which had boosted expectations of policy easing in the world’s largest economy and helped lift risk assets across the board. Odds of a 25-basis-point cut by the US central bank retreated slightly after the producer price figures, per CME’s FedWatch tool.

Markets also await this week’s Jackson Hole symposium, where Fed Chair Jerome H. Powell will give a speech, for clues on the Fed’s next move. Signs of weakness in the US labor market combined with any inflation from trade tariffs could present a dilemma for the Fed’s rate cut trajectory.

For this week, the trader said the peso could continue trading sideways against the dollar ahead of the release of the minutes of the Fed’s latest policy meeting.

“Markets are also awaiting developments if the Fed chair will be replaced,” the trader said.

The trader sees the peso moving between PHP 56.80 and PHP 57.30 against the dollar this week, while Mr. Ricafort expects it to range from PHP 56.70 to PHP 57.30. — A.M.C. Sy with Reuters