Peso may strengthen with Fed likely to cut
THE PESO may strengthen against the dollar in the coming days, with the US Federal Reserve expected to deliver its first rate cut this year at this week’s meeting amid weak data out of the world’s largest economy.
On Friday, the local unit closed at P57.10 per dollar, rising by 9.1 centavos from its P57.191 finish on Thursday, data from the Bankers Association of the Philippines showed.
However, week on week, the peso was down by 18.5 centavos from its P56.915 close on Sept. 5.
“The dollar-peso closed lower, tracking dollar weakness overnight amid rising expectations of rate cuts by the Fed this year driven by a cooling labor market,” a trader said in a phone interview.
The dollar was generally weaker against Asian currencies on Friday amid heightened bets of Fed cuts even as US consumer inflation data for August was in line with expectations, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The US dollar declined versus major global and Asian currencies lately amid increased odds of future Fed rate cuts after the latest US consumer inflation data, which was in line with market estimates but still above the 2% target of the US central bank, and US jobless claims data, which was near the highest in four years that could signal weakness in the US labor market, thereby increasing the urgency of a 25-basis-point (bp) Fed rate cut as early as the next Fed rate-setting meeting on Sept. 17, 2025 and as the markets priced in three 25-bp Fed rate cuts for the rest of 2025 after mostly weaker US jobs and other economic data recently,” he said.
For this week, the trader said the peso could mostly move sideways before the Fed’s policy decision on Sept. 16-17. The trader sees the peso moving between P56.80 and P57.20 per dollar this week, while Mr. Ricafort expects it to range from P56.80 to P57.30.
In the Asian session on Friday, the dollar regained some strength but remained under pressure as a surge in US jobless claims and a modest tick-up in inflation kept investors zeroed in on likely Federal Reserve interest rate cuts this week and beyond, Reuters reported.
The dollar index was last trading up 0.1% at 97.643, having snapped a two-day winning streak on Thursday and on track to record its second consecutive weekly decline.
On Thursday, data showed the biggest weekly increase in the number of Americans filing new applications for jobless benefits in four years.
That overshadowed US consumer inflation data for August, which showed prices rising at the fastest pace in seven months but still modest and broadly in line with expectations.
While the mixed data might add some wrinkles to the Fed’s policy deliberations this week, investor focus is mostly centered on rate cut prospects for now.
Pricing of Fed fund futures indicates that the market believes the Fed is certain to cut its key interest rate by 25 bps on Sept. 17 as labor market softness overshadows inflation risks.
However, traders are reining in bets on a jumbo 50 bps rate cut next month, with pricing implying a shallower path of easing before the end of the year than anticipated earlier, according to the CME Group’s FedWatch tool. — Aaron Michael C. Sy with Reuters
