Peso rises on profit taking after sharp depreciation

The peso rebounded slightly against the dollar on Tuesday due to profit-taking after the currency dropped to an over 18-month low the previous trading day.

The local unit closed at PHP 57.84 per dollar on Tuesday, rising by two centavos from its PHP 57.86 finish on Monday, Bankers Association of the Philippines data showed.

Monday’s close was the peso’s worst showing since its PHP 58.19-per-dollar finish on Nov. 10, 2022.

The peso opened Tuesday’s session slightly stronger at PHP 57.85 against the dollar. Its intraday best was at PHP 57.80, while its weakest point was at PHP 57.89 versus the greenback.

Dollars exchanged went up to USD 1.135 billion on Tuesday from USD 1.132 billion on Monday.

“The peso slightly recovered due to profit taking by market participants after hitting the low [on Monday],” a trader said in an e-mail.

The peso was also supported by a generally weaker dollar on Tuesday ahead of key US inflation reports and US Federal Reserve Chair Jerome H. Powell’s speech, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar edged higher on Tuesday as traders awaited US inflation data, Reuters reported.

Traders are awaiting the US consumer price index, scheduled for Wednesday, to gauge what path the Federal Reserve will take this year in the wake of recent softer-than-expected US labor market data and comments from officials that indicated the central bank was unlikely to raise rates further.

Money markets have dialed back their expectations of Fed rate cuts this year due to sticky inflation and are now pricing in about 40 basis points of easing this year, compared with 150 bps of cuts anticipated at the start of 2024. They are also pricing in a first rate cut, with a 50% chance, only in September, according to the CME FedWatch tool.

Nearly two-thirds of economists polled by Reuters expect the Fed to cut its key interest rate twice this year, starting in September.

US inflation this week is expected to show that core consumer prices rose 0.3% month-on-month in April, down from a 0.4% growth the prior month, according to a Reuters poll.

But before that, US producer price index data was due to be released later on Tuesday, which analysts will parse through to get a sense of whether inflation is heading towards the Fed’s target of 2%.

In the meantime, the dollar index, which measures the US currency against six rivals, was last 0.17% higher at 105.37. The index has slipped almost 1% in May.

For Wednesday, the trader said the peso will likely remain weak due to Mr. Powell’s speech scheduled overnight.

The trader sees the peso moving between PHP 57.65 and PHP 57.90 per dollar on Wednesday, while Mr. Ricafort expects it to trade from PHP 57.75 to PHP 57.95. — A.M.C. Sy with Reuters