Weak dollar shores up peso amid Fed rate cut bets

The peso appreciated on Thursday as the dollar weakened amid reduced expectations of a rate cut by the US Federal Reserve.

It closed at PHP 55.84 a dollar, 9 centavos stronger than its PHP 55.93 finish on Wednesday, based on Bankers Association of the Philippines data posted on its website.

The peso opened at PHP 55.87, appreciated to as much as P55.765 and depreciated to as much as PHP 55.90. Dollars exchanged went down to USD 1.43 billion from USD 1.74 billion on Wednesday.

The dollar lost ground due to expectations that the Fed would not rush to cut rates, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

The dollar hovered near a one-month peak versus major peers on Thursday after robust US retail sales data added to building expectations the Federal Reserve would not rush to lower interest rates, Reuters reported.

The US dollar index, which measures the currency against a basket of six rivals, eased slightly to 103.29 in the Asian afternoon after reaching 103.69 on Wednesday for the first time since Dec. 13.

Traders have trimmed the odds of a first Fed rate cut by March to 61%, from 65.1% on Tuesday, according to CME’s FedWatch Tool.

The Federal Open Market Committee raised borrowing costs by 525 basis points (bps) to 5.25-5.5% from March 2022 to July 2023.

“The peso appreciated from profit-taking by market participants after hitting the 56-level intraday,” a trader said in an e-mail.

The trader expects the peso to strengthen further against the dollar on Friday ahead of a likely weak report on US initial jobless claims.

The trader expects the peso to move between PHP 55.70 and PHP 55.95, while Mr. Ricafort sees it ranging from PHP 55.75 to PHP 55.95. — Aaron Michael C. Sy