Peso rebounds vs dollar as dovish Powell comments bolster easing view

The peso rebounded against the dollar on Tuesday as dovish comments from the US Federal Reserve chief bolstered bets of a rate cut from the central bank soon.

The local unit closed at PHP 58.385 per dollar on Tuesday, strengthening by 9.5 centavos from its PHP 58.48 finish on Monday, Bankers Association of the Philippines data showed.

The peso opened Tuesday’s session slightly stronger at PHP 58.455 against the dollar. Its intraday best was its closing level of PHP 58.385, while its weakest showing was at PHP 58.52 versus the greenback.

Dollars exchanged rose to USD 1.42 billion on Tuesday from USD 1.095 billion on Monday.

The peso rose as the dollar remained relatively weak on Tuesday due to dovish comments from Fed Chair Jerome H. Powell overnight, a trader said by phone.

The dollar inched away from five-week lows on Tuesday, as investors weighed the case for a September rate cut after comments by Mr. Powell and pondered rising odds for the reelection of former US President Donald J. Trump, Reuters reported.

On Monday, Mr. Powell said the second quarter’s three US inflation readings “add somewhat to confidence” that the pace of price increases is returning to the Fed’s target in a sustainable way.

Markets now anticipate 68 basis points of easing this year, with a rate cut in September fully priced in, the CME FedWatch tool showed.

The dollar index, which measures the US unit against six peers, was 0.12% higher at 104.36, not far from the one-month low of 104 it touched on Monday.

The peso was also supported by lower global crude oil prices and improved global market risk appetite, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

On Tuesday, Brent futures fell 0.3% to USD 84.63 a barrel, while US West Texas Intermediate crude slipped 0.3% to USD 81.64, Reuters reported.

For Wednesday, the trader expects the peso to move between PHP 58.20 and PHP 58.60 per dollar, while Mr. Ricafort sees it ranging from PHP 58.30 to PHP 58.50. — AMCS with Reuters