Peso surges vs dollar on dovish Fed hopes
THE PESO surged to a new four-month high against the dollar on Monday on expectations of dovish signals from the US Federal Reserve chief this week.
The local unit closed at P56.64 per dollar on Monday, strengthening by 60.5 centavos from its P57.245 finish on Friday, Bankers Association of the Philippines data showed.
This was the peso’s strongest finish in more than four months or since its P56.53-per-dollar close on April 12.
The peso opened Monday’s session stronger at P57.05 against the dollar, which was already its weakest showing for the day. Its intraday best was at P56.63 versus the greenback.
Dollars exchanged rose to $1.61 billion on Monday from $1.44 billion on Friday.
The peso strengthened against a generally weaker dollar on Monday due to market expectations of dovish sentiment from the minutes of the Federal Open Market Committee’s July policy meeting and Fed Chair Jerome H. Powell’s speech at the Jackson Hole Symposium this week, a trader said by phone.
The local unit gained on “softer US economic data lately and mostly dovish signals from most Fed officials recently that could support future Fed rate cuts,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The dollar slid on Monday on expectations the US economy would dodge a recession and cooling inflation would kick off a cycle of interest rate cuts, Reuters reported.
The dollar lapsed 1% to 146.12 yen, while the euro firmed to $1.1040, just below last week’s peak of $1.1047.
Federal Reserve members Mary Daly and Austan Goolsbee were out over the weekend to flag the possibility of easing in September, while minutes of the last policy meeting due this week should underline the dovish outlook.
Meanwhile, Mr. Powell speaks in Jackson Hole on Friday and investors assume he will acknowledge the case for a cut.
Futures are fully priced for a quarter-point move, and imply a 25% chance of 50 basis points with much depending on what the next payrolls report shows.
For Tuesday, the trader sees the peso moving between P56.60 and P56.90 per dollar, while Mr. Ricafort expects the peso to range from P56.55 to P56.75. — AMCS with Reuters