THE PESO strengthened further against the dollar on Wednesday to hit a six-week high as market participants priced in dovish pronouncements from the US central bank.
The local currency ended the session yesterday at P51.78 versus the greenback, 13 centavos stronger than P51.91-per-dollar finish on Monday.
This was the peso’s best showing in more than six weeks or since it closed at P51.765 per dollar last April 17.
The peso opened the session stronger at P51.75 versus the dollar, climbing to as high as P51.70 intraday. Meanwhile, its worst showing for the day stood at P51.815 against the US unit.
Dollars traded reached $1.04 billion, higher than the $782.85 million that switched hands the previous session.
Traders said the peso strengthened after St. Louis Federal Reserve President James Bullard said a cut in interest rates “may be warranted soon.”
“We don’t really have anything to move the market, but we saw speeches overnight that they are already warranting rate cuts soon,” a trader said in a phone interview.
In a prepared speech delivered in Chicago on Monday, Mr. Bullard said a downward adjustment in rates may be needed soon “to help re-center inflation and inflation expectations at target.”
He added that a cut in benchmark rates will provide “insurance” in case of a sharper-than-expected decline in the economy.
Mr. Bullard’s speech deviated from the pronouncement of the Fed, wherein they committed to be “patient” in adjusting interest rates amid slower global economic growth and headwinds caused by the trade dispute between the US and China.
“The peso appreciated on increased market expectations of a possible cut in US policy rates later this year after St. Louis Fed President James Bullard commented that a reduction in the federal funds rate might be ‘warranted soon’ due to global trade uncertainties and persistent low US inflation,” another trader said.