Peso rises to near seven-month high on optimism over trade deals

THE PESO hit a fresh near seven-month high against the dollar on Wednesday amid hopes of a de-escalation in trade tensions between the United States and China.

The local unit closed at P56.545 per dollar on Wednesday, strengthening by 13.5 centavos from its P56.68 finish on Tuesday, Bankers Association of the Philippines data showed.

This was the peso’s best finish in nearly seven months or since its P56.295 close on Oct. 4, 2024.

The local unit opened Wednesday’s session slightly stronger at P56.65 against the dollar, which was already its worst showing. Its intraday best was its closing level of P56.545 versus the greenback.

Dollars exchanged went down to $1.19 billion on Wednesday from $1.46 billion on Tuesday.

The peso climbed as investors await further trade policy developments between the US and China, a trader said in a phone interview.

Financial markets also saw some relief after US President Donald J. Trump said he does not plan to fire US Federal Reserve Chair Jerome H. Powell, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

For Thursday, the trader said the peso may move between P56.40 and P56.70 per dollar, while Mr. Ricafort expects it to range from P56.50 to P56.70.

The US dollar steadied against its major peers on Wednesday on hopes of de-escalating trade tensions and as Mr. Trump backed away from threats to fire the head of the Federal Reserve, offering relief to investors, Reuters re-ported.

Markets this week have been grappling with the notion that the Fed’s independence could be under threat after repeated verbal attacks by Mr. Trump on Mr. Powell for not cutting rates since the president took office again in January.

But late on Tuesday, Mr. Trump appeared to back down.

“I have no intention of firing him,” Mr. Trump told reporters in the Oval Office on Tuesday. “I would like to see him be a little more active in terms of his idea to lower interest rates.”

Also, Mr. Trump and US Treasury Secretary Scott Bessent separately suggested that there could be a de-escalation in US-China trade tensions and any trade deal with China could “substantially” cut tariffs.

Investors hastened back to the dollar, which has been hovering near three-year lows in recent weeks and whose safe-haven status had been questioned in view of Mr. Trump’s erratic trade policies and their potential impact on the US economy.

The dollar rose rapidly at the start of the trading day in Asian hours, but it has steadied since then as market sentiment remained fragile.

The dollar climbed more than 1% against the yen to 143.21 in early trading and was last steady at 141.81.

Despite its attempted rebound, the dollar is not far off its multi-year lows against the euro and the Swiss franc and seven-month low versus the Japanese yen.

Meanwhile, Mr. Trump expressed optimism that a trade deal with China could “substantially” cut tariffs. He said a deal would lower tariffs on Chinese goods, suggesting that a final deal will not “be anywhere near’ current tariff rates. But he added that “it won’t be zero.”

Beyond Mr. Trump’s attacks on the Fed, investor focus has been on trade deals between the US and other countries.

After setting a baseline import tax of 10% and much higher on dozens of countries earlier this month, Mr. Trump abruptly put the steeper levies on hold for 90 days for countries to negotiate less stringent rates.

White House press secretary Karoline Leavitt said 18 countries have offered proposals so far, with Mr. Trump’s trade negotiating team set to meet with 34 this week to discuss tariffs. — A.M.C. Sy with Reuters