Peso slips as US rate cut bets ease
THE PESO declined a tad against the dollar on Monday on the back of pronouncements from US Federal Reserve Bank of New York President John Williams.
The local unit closed Monday’s session at P51.076 versus the greenback, 3.6 centavos weaker than its P51.04-per-dollar finish on Friday.
The peso traded in a tight range, opening the session at P51.075 versus the dollar. It declined to as low as P51.14 intraday, while its best showing stood at P51.07 per US currency.
Trading volume thinned to $725.91 million from the $1.095 billion that switched hands the previous session.
“The peso weakened on reduced expectations of a 50-basis-point policy rate cut from the Federal Reserve after dovish comments from Fed Williams were dialled down by the Reserve Bank of New York,” a trader said in an e-mail on Monday.
The New York Fed clarified that hawkish comments from Mr. Williams were not meant to imply that there would be an aggressive US rate cut on July 31.
Mr. Williams said in a speech on Thursday that the US central bank needs to take “preventative measures” while interest rates are down and economic growth is easing than “to wait for disaster to unfold.”
“When they clarified Fed William’s speech, the dollar reversed a little bit over the weekend,” another trader said in a phone interview.
The second trader added that the market was cautious yesterday as investors awaited the State of the Nation Address of President Rodrigo R. Duterte.
“They will most likely look closely on his comment on the infra projects and his economic measures,” the trader said.
For today, both traders expect the peso to move between P51 and P51.20 against the dollar.
“The local currency might appreciate on anticipations of weaker US home sales data,” the first trader said.
Most Asian emerging currencies also fell on Monday as the US dollar held steady, while heightened tensions in the Middle East pushed oil prices higher.
The dollar index was barely changed at 97.171 after gaining 0.35% last week, but the greenback broke above 108 yen to hit its highest since Wednesday, still in the middle of the 107-109 range where it has traded for a month.
Underpinning the dollar, investors on Friday tempered expectations for deep US interest rate cuts later this month, though a quarter-point cut is still widely expected.
Brent crude futures were up 51 cents, or 0.8%, at $62.98 a barrel by 0042 GMT after a British tanker was seized by the Iranian military at the end of last week.
Any rise in oil prices puts pressure on major importers of the commodity in the region such as India, Indonesia and Thailand.
The dollar would hold the upper hand in Asia this week and the “jittery risk environment” surrounding Iran tensions could further impinge on the Asian currencies, OCBC Bank analysts said in a note on Monday. — KANV with Reuters
