Peso strengthens vs dollar on BSP rate cut, dovish Fed bets

The peso rose slightly against the dollar on Thursday after the Bangko Sentral ng Pilipinas (BSP) delivered a widely-expected rate cut and amid dovish expectations for the US central bank’s easing cycle.

The local unit closed at PHP 57.12 per dollar, strengthening by four centavos from its PHP 57.16 finish on Wednesday, Bankers Association of the Philippines data showed.

The peso opened the session sharply higher at PHP 57.05 against the dollar. Its intraday best was at PHP 56.93, while its worst showing was at PHP 57.17 versus the greenback.

Dollars exchanged went down to USD 1.86 billion on Thursday from USD 1.9 billion on Wednesday.

“The dollar-peso closed a tad lower because the BSP delivered a rate cut. But profit taking ensued because the market is awaiting US PCE (personal consumption expenditures) data,” a trader said in a phone interview.

The BSP on Thursday cut its target reverse repurchase rate by 25 basis points (bps) to 5%, as expected by all 20 economists in a BusinessWorld poll conducted last week. Rates on the overnight deposit and lending facilities were likewise lowered by 25 bps to 4.5% and 5.5%, respectively.

This marked the third straight 25-bp reduction since April. Since starting its easing cycle in August 2024, the BSP has now slashed borrowing costs by a cumulative 150 bps.

The dollar was also generally weaker on Thursday amid dovish signals from US Federal Reserve officials, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Friday, the trader sees the peso moving between PHP 56.90 and PHP 57.30 per dollar, while Mr. Ricafort expects it to range from PHP 57 to PHP 57.2.

The dollar was little changed on Thursday as traders added to bets for a Federal Reserve interest rate reduction next month after New York Fed chief John Williams signalled a cut was possible, Reuters reported.

The US currency has been under renewed pressure from President Donald J. Trump’s ramped-up campaign to exert more influence over monetary policy decisions, as he attempts to fire Fed Governor Lisa Cook and replace her with a loyalist.

The dollar flattened against the euro even after France’s prime minister on Monday unexpectedly called a confidence vote for next month, which is likely to result in the fall of his minority government.

The Fed’s Mr. Williams said in an interview with CNBC on Wednesday that it is likely interest rates can fall at some point, but policymakers will need to see what upcoming data indicate about the economy to decide if it’s appro-priate to make a cut at the Sept. 16-17 meeting.

Key among data releases before that meeting are the PCE price index on Friday — the Fed’s preferred inflation measure — and the monthly payrolls report a week later.

Traders currently lay around 89% odds of a quarter-point rate cut next month, and have priced in a cumulative 55 bps of easing by yearend, according to LSEG data.

That helped send two-year Treasury yields, which are sensitive to policy expectations, sliding to the lowest level since May 1, adding to pressure on the dollar.

Mr. Trump’s push to place hand-picked, dovish-leaning candidates into the central bank’s decision-making committee also pulled short-term yields lower, even though his attack on Ms. Cook could spark a protracted legal battle after she sued to keep her job.

“Short-dated US yields remain near their recent lows, and most would conclude that this week’s (attempt to remove) Fed’s Lisa Cook by President Trump is dollar-negative,” said Chris Turner, global head of markets at ING.

The dollar index, which gauges the currency against six major peers, edged 0.1% higher at 98.225, following two days of declines.

The euro was little changed, down 0.07% at USD 1.1630.

Against the yen, the dollar slipped 0.03% to 147.34 yen.

Japan’s chief trade negotiator Ryosei Akazawa canceled a trip to Washington at the last minute on Thursday, delaying an announcement of the details of Japan’s USD 550-billion investment pledge in the United States as part of a tariff deal.

A government spokesperson said the decision was taken after talks with the US side revealed some points that need further discussion “at the administrative level.”

The dollar slipped to its lowest level against China’s offshore yuan since November, last down 0.2% to 7.1360 yuan in offshore trading. — A.M.C. Sy with Reuters