Peso rebounds after hitting PHP 62.90 range

The peso rebounded slightly against the dollar on Tuesday from its latest all-time-low close, but still hit a new record intraday trough as players looked ahead to the US Federal Reserve’s policy meeting, where a rate hike is expected due to growing inflation pressures from rising oil prices.

The currency gained 2.5 centavos to end at PHP 62.835 versus the greenback from its record-low close of PHP 62.86 on Monday, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Tuesday’s session weaker at PHP 62.90 per dollar, with its intraday low of PHP 62.925 now the weakest intraday level for the peso on record, surpassing the PHP 62.875 logged on Monday.

Meanwhile, its best showing was at PHP 62.777.

Dollars traded jumped to USD 1.899 billion from USD 969.22 million.

“The dollar-peso closed lower after earlier touching a new all-time high as oil prices nearly hit USD 110-a-barrel levels. In the afternoon, we saw some heavy selling as players trimmed positions ahead of the FOMC (Federal Open Market Committee) meeting,” a trader said by phone.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that there have been signs of intervention at the PHP 62.70-PHP 62.80 levels this week.

He added that the peso was supported by high trading liquidity.

The trader said the peso may breach the PHP 63 level this week, depending on the US central bank’s policy decision and signals, as well as developments in the Middle East.

For Wednesday, the trader said the peso could range from PHP 62.70 to PHP 63 against the dollar, while Mr. Ricafort sees it moving between PHP 62.75 and PHP 62.95.

The euro was pinned at one-month lows against a broadly strengthening dollar on Tuesday, as surging oil prices lifted Treasury yields and reinforced expectations that the Federal Reserve will hike interest rates this week, Reuters reported.

Oil prices held near a four-month peak after Yemen’s Iran-aligned Houthis launched a new wave of attacks on Saudi Arabia and Gulf-Iran talks were postponed.

Markets now see a Fed hike on Wednesday as a near certainty, with CME’s FedWatch tool pricing in a more than 94% chance of an interest rate increase.

The dollar’s six-currency index rose 0.1% to 99.61, standing near its highest in about two weeks, also gaining support from weakened risk appetite as stock markets fell.

The renewed energy-induced inflation pressures follow a US jobs report that was much stronger than expected and a pickup in consumer prices for August, strengthening market conviction that the Fed will raise rates on Wednesday. — Aaron Michael C. Sy with Reuters