Peso rebounds vs dollar

The peso rebounded on Wednesday as the dollar weakened after Fitch Ratings warned that US banks could see rating downgrades.

The local currency closed at PHP 56.515 versus the dollar on Wednesday, strengthening by 32.50 centavos from Tuesday’s PHP 56.84 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Wednesday’s session at PHP 56.80 per dollar. Its intraday best was at PHP 56.515, while its weakest showing was at PHP 56.91 against the greenback.

Dollars traded slipped to USD 1.02 billion on Wednesday from the USD 1.09 billion on Tuesday.

“The peso appreciated significantly as the dollar’s appeal waned after Fitch Ratings warned about potential credit rating downgrade on large US banks,” a trader said in an e-mail.

The dollar index, which measures the currency against six major peers, was down 0.22% at 102.98, ending a run of four straight daily increases, Reuters reported.

Investors have bought the safe-haven dollar on the back of strong US economic data and rising concerns about China.

An analyst at Fitch Ratings warned that US banks, including JPMorgan Chase, could be downgraded if the agency further cuts its assessment of the operating environment for the industry, according to a report from CNBC on Tuesday.

In June, Fitch lowered the score of the US banking industry’s “operating environment” to AA- from AA, citing pressure on the country’s credit rating, gaps in regulatory framework and uncertainty about the future trajectory of interest rate hikes.

Another one-notch downgrade, to A+ from AA-, would force Fitch to reevaluate ratings on each of the more than 70 US banks it covers, analyst Chris Wolfe told CNBC.

Lenders were rocked earlier this month after Fitch’s peer Moody’s downgraded 10 mid-sized US banks and warned it may cut ratings of several others.

The peso was also supported by lower global crude oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

Oil prices stabilized on Wednesday as investors weighed worries about China’s embattled economy against tighter supply in the United States.

Brent crude futures edged up 20 cents to USD 85.09 a barrel by 0831 GMT, while US West Texas Intermediate crude crept 18 cents higher to USD 81.17 a barrel.

Both benchmarks fell more than 1% in the previous session to their lowest since August 8.

For Thursday, the trader said the peso could appreciate against the dollar ahead of the Bangko Sentral ng Pilipinas’ policy meeting.

Both the trader and Mr. Ricafort see the peso moving between PHP 56.40 and PHP 56.60 per dollar on Thursday. — AMCS with Reuters