Peso strengthens as market digests Fed guidance

The peso strengthened against the dollar on Monday as the market continued to digest the US Federal Reserve’s rate cut last week and policy guidance from officials.

The local unit closed at PHP 57.056 versus the greenback, rising by 9.4 centavos from its PHP 57.15 finish on Friday, Bankers Association of the Philippines data showed.

The peso opened Monday’s session weaker at PHP 57.15 versus the dollar. Its intraday high was at PHP 57.04, while its worst showing was at PHP 57.195 against the greenback.

Dollars exchanged went down to USD 1.27 billion on Monday from USD 1.31 billion on Friday.

“The peso continued to appreciate on more dovish expectations following the Fed decision last week,” a trader said in a Viber message.

The peso was also supported by the dollar’s decline late last week after the Fed meeting and lower global crude oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Tuesday, the trader said the peso could continue to appreciate on expectations of a mild uptick in the August US personal consumption expenditures price index data to be released this week, which would support further Fed easing.

The trader sees the peso moving between PHP 56.90 and PHP 57.15 per dollar, while Mr. Ricafort expects it to range from PHP 56.95 to PHP 57.15.

The dollar rose slightly on Monday as traders looked ahead to a slew of speeches from Federal Reserve officials throughout the week that could provide further clues to the US rate outlook, after the central bank resumed its easing cycle last week, Reuters reported.

The greenback hovered near levels seen before last week’s Fed decision. The current pricing is consistent with the central bank’s messaging, which highlighted rising concerns over the labor market as the key driver of policy, analysts said.

Last week’s US economic data showed the number of Americans filing new applications for unemployment benefits fell, reversing the prior week’s jump.

“The lack of significant data until Friday’s core personal consumption expenditures inflation release leaves investors open to rethinking Fed rate cuts and the plan ahead,” said Bob Savage, head of markets macro strategy at BNY Mellon.

“Fed speakers will be important, with over 18 events planned,” he added, mentioning Chair Jerome H. Powell, but also the Cleveland Fed’s Beth Hammack and the St. Louis Fed’s Alberto Musalem given their hawkish view prior to the Fed meeting. — A.M.C. Sy with Reuters