Peso strengthens amid market caution over Trump’s higher tariffs

The peso appreciated against the dollar on Wednesday amid market caution due to uncertainty stemming from US President Donald J. Trump’s planned tariffs.

It closed at PHP 57.88 a dollar, five centavos stronger than its P57.93 finish on Tuesday, according to Bankers Association of the Philippines data posted on its website.

The peso opened at PHP 57.87 against the dollar. It weakened to as much as PHP 57.92 and strengthened to as much as PHP 57.855 against the greenback. Dollars exchanged fell to USD 1.09 billion from USD 1.38 billion on Tuesday.

“The dollar-peso traded cautiously amid uncertainties on Trump’s trade policies and ahead of US GDP data tomorrow,” a trader said by telephone.

Mr. Trump on Monday said tariffs against Canada and Mexico would proceed as scheduled, ostensibly from March 4.

The dollar pulled off an 11-week low versus major peers, helped by a rebound in short-term Treasury yields even as a run of weak economic data weighed on investor sentiment.

The Canadian dollar slipped to a two-week low and the Mexican peso was weaker with a new round of tariffs from Mr. Trump’s administration due to hit those neighbors next week.

“Currency markets remain fickle,” DBS analysts wrote in a client note, citing swings in the dollar over the course of this week.

In terms of the US economy, “sentiment has been shaky for a while and any miss in data would place downward pressure on yields,” they said. “We suspect that this risk-off move may have further to go and expect US yields to maintain a downward bias in the short term.”

The dollar index, which measures the currency against six major rivals, added 0.3% to 106.51 in the Asian afternoon, rising from this week’s low of 106.13, the weakest level since Dec. 10.

The dollar index weakened 0.5% on Tuesday after the US Conference Board said its consumer confidence index dropped 7 points, its largest fall since August 2021, to 98.3, well short of the 102.5 estimate of economists polled by Reuters.

The result added to other weak data, pushing expectations toward two quarter-point interest rate cuts by the Federal Reserve over the remainder of this year, with the next likely coming in July, according to market pricing.

The two-year US Treasury yield declined as low as 4.074% on Tuesday for the first time since Nov. 1, but was up at 4.1271% on Wednesday.

“US data flow on net is now disappointing expectations, calling into question the US exceptionalism narrative that had been USD supportive,” said Tapas Strickland, head of market economics at National Australia Bank.

Lower global crude oil prices also supported the peso on Wednesday, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

Brent crude rose 0.3% or 24 cents to USD 73.26 a barrel by 7:35 a.m. GMT. US West Texas Intermediate (WTI) crude oil futures rose 0.3% or 23 cents to USD 69.16, according to Reuters.

These were up from Tuesday, when oil prices fell about 2% to a two-month low, with Brent futures falling 2.4% or USD 1.76 to settle at USD 73.02 a barrel, while US WTI crude fell 2.5% or USD 1.77 to USD 68.93.

The trader expects the peso to trade at PHP 57.70 to PHP 58 a dollar on Thursday, while Mr. Ricafort sees it moving from PHP 57.75 to PHP 57.95. — Aaron Michael C. Sy, Reporter with Reuters