Peso climbs to new high as markets eye rate cuts

THE PESO strengthened against the dollar to hit a fresh high on the back of continued bets of monetary policy easing by the US Federal Reserve.

The local unit closed at P51 versus the greenback on Monday, 13 centavos higher than its P51.13-per-dollar finish last Friday.

This was the peso’s best showing in nearly one-and-a-half years or since it closed at P50.84 against the dollar on Jan. 26, 2018.

The peso opened the session at its worst showing of P51.155 per dollar, while it closed yesterday’s session at its intraday high.

Dollars traded thinned to $744.96 million from the $910.96 million that changed hands the previous session.

A trader said the peso moved in line with other currencies yesterday as the dollar was mostly weaker due to positioning ahead of a possible rate cut by the Fed.

Last Wednesday, Fed chair Jerome Powell hinted on a cut in benchmark rates in a prepared speech to the US Congress, strengthening the case for an easing move when the policy-making Federal Open Market Committee (FOMC) meets again later this month.

In his testimony, he said the central bank will “act as appropriate” to sustain expansion as “crosscurrents” such as trade tensions and concern on global growth are weighing on the economy.

“Even though an aggressive rate cut is unlikely, more or less there will be a cut by the FOMC, the first trader said, adding that the greenback is still trading at the low end of its recent range.

“The peso appreciated amid heightened global dovish sentiment after the Chinese economy grew at a slower annual pace in the second quarter of 2019,” another trader said in an e-mail.

China’s statistics bureau reported on Monday that its gross domestic product (GDP) grew 6.2% in the second quarter, its slowest pace in 27 years, dragged by the effects of its trade war with the US.

“The GDP data was in line with market expectations, but the industrial production and retail sales were better. That brought a slight spillover of risk-on sentiment,” the first trader said.

The trader added that the upbeat domestic remittances data also boosted the risk appetite of the market.

Cash sent home by Filipinos in May stood at $2.6 billion, 5.7% higher from the $2.5 billion booked in the same month last year. This brought cash remittances in the five months ended May to $12.3 billion, up 4.5% year-on-year.

For today, the second trader expects the peso to move between P50.85 and P51.15 versus the dollar. The other gave a P51-P51.15 range but noted the local unit might breach the support level. — Karl Angelo N. Vidal