Peso weakens on Fed concerns

The peso dropped against the dollar on Tuesday as US President Donald J. Trump’s move to fire a Federal Reserve official sparked renewed concerns over the central bank’s independence.

The local unit closed at PHP 57.07 per dollar, weakening by 12 centavos from its PHP 56.95 finish on Friday, Bankers Association of the Philippines data showed.

The peso opened the session stronger at PHP 56.70 against the dollar. Its intraday best was at PHP 56.65, while its worst showing was at PHP 57.10 against the greenback.

Dollars exchanged went down to USD 1.44 billion on Tuesday from USD 1.7 billion on Friday.

Philippine financial markets were closed on Monday due to a holiday.

The peso weakened “amid concerns over the independence of the US central bank after Trump fired Fed Governor Lisa Cook,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar steadied later in the session after a volatile start on Tuesday as Mr. Trump’s unprecedented move to fire Ms. Cook renewed concerns over the central bank’s independence, Reuters reported.

The dollar index, which measures the US currency against six others, was flat at 98.42, recovering from a fall of as much as 0.4% after Mr. Trump made the announcement in a letter to Ms. Cook that he posted on social media.

The move marks a sharp escalation of Mr. Trump’s battle against the Fed. The president has repeatedly berated Fed Chair Jerome H. Powell for not lowering interest rates, though has stopped threatening to fire him ahead of the end of his term in a little under nine months.

In the letter, Mr. Trump said he was firing Ms. Cook over alleged improprieties in obtaining mortgage loans. In response, Ms. Cook said Mr. Trump has no authority to fire her from the central bank, and she will not resign.

Money markets are currently pricing in a near 82% probability of a rate cut at the Fed’s September meeting.

Meanwhile, a trader said the peso tracked the decline of most currencies against the dollar on Tuesday.

“Furthermore, importer demands also could have strengthened last minute, further compounding the peso’s depreciation,” the trader added.

For Wednesday, Mr. Ricafort sees the peso moving between PHP 56.95 and PHP 57.20 per dollar. — A.M.C. Sy with Reuters