Peso jumps before Fed minutes, symposium
THE PESO rebounded against the dollar on Wednesday on expectations of a dovish tone from the minutes of the US Federal Reserve’s July meeting overnight and the much-awaited gathering of US central bankers later this week.
The local currency closed at P56.96 versus the greenback, climbing by 14 centavos from Tuesday’s finish of P57.10, data from the Bankers Association of the Philippines’ website showed.
The local unit opened Wednesday’s session sharply weaker at P57.25 per dollar. Its intraday best was its closing level of P56.96, while its weakest showing was at P57.39 against the greenback.
Dollars traded dropped to $1.83 billion on Wednesday from $1.98 billion on Tuesday.
“The peso appreciated from dovish expectations ahead of the release of Fed policy minutes overnight,” a trader said in a Viber message.
The peso rose “ahead of the speech by Fed Chair Jerome H. Powell in view of the Fed’s Jackson Hole economic policy symposium… as a source of new leads on possible Fed rate cuts,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The trader said anticipation for Mr. Powell’s speech during the gathering could continue to support the peso when trading resumes on Friday. Philippine financial markets are closed on Aug. 21 (Thursday) for the Ninoy Aquino Day holiday.
The trader sees the peso moving between P56.80 and P57.05 versus the dollar on Friday, while Mr. Ricafort said the local unit could trade from P56.85 to P57.10.
The US dollar was little changed on Wednesday as traders awaited a speech from Mr. Powell at the annual Jackson Hole symposium later this week for clues on the monetary policy path, Reuters reported.
The dollar index, which measures the US currency against six others, was flat at 98.319, after earlier touching a more than one week high of 98.441.
Friday’s speech by Mr. Powell is the market’s main focus, as traders watch for any pushback against market pricing of a rate reduction at the Fed’s Sept. 16-17 meeting.
Traders now place odds of about 85% on a quarter-point cut next month and expect about 54 basis points of reductions by yearend.
Traders, who ramped up bets for Fed cuts after a surprisingly weak US payrolls report at the start of this month, were further encouraged after consumer price data showed limited upward pressure from tariffs.
However, a hotter-than-expected producer price reading last week complicated the policy picture.
Mr. Powell has said he is reluctant to cut rates because of expected tariff-driven price pressures this summer.
Later on Wednesday, the Fed was set to issue the minutes of its meeting on July 29-30, when it held rates steady, although they may offer limited insight as the meeting came before the weak jobs numbers. — ARAI with Reuters
