THE PESO edged up on Thursday on positive sentiment following the US Federal Reserve’s decision to cut benchmark rates anew.
The local unit ended at P52.18 against the greenback on Thursday, appreciating by two centavos from its P52.20-per-dollar close on Wednesday.
The peso opened sharply weaker at P52.31 versus the dollar. Its weakest point recorded at P52.333, while its closing level was its intraday high.
Dollars traded on Thursday climbed to $1.114 billion from the $912.33 million recorded on Wednesday.
One trader attributed the peso’s sideways performance to the Federal Open Market Committee (FOMC) meeting.
“FOMC failed to release any easing signal for the future…. That caused stronger dollar in the morning…but in the afternoon, the lower US Treasury yields made the dollar weaker. We also saw a selling trend in the market,” the trader said.
“The peso is also stronger after global crude oil prices continued to ease back to familiar ranges…,thereby supporting sentiment on the global financial markets,” Rizal Commercial Banking Corp. chief economist Michael L. Ricafort added.
The US Federal Reserve cut interest rates again on Wednesday to help sustain a record-long economic expansion but signaled a higher bar to further reductions in borrowing costs, eliciting a fast and sharp rebuke from President Donald Trump.
Describing the US economic outlook as “favorable,” Fed Chair Jerome Powell said the rate cut was designed “to provide insurance against ongoing risks” including weak global growth and resurgent trade tensions.
“If the economy does turn down, then a more extensive sequence of rate cuts could be appropriate,” Mr. Powell said in a news conference after the Fed announced it had lowered its benchmark overnight lending rate by a quarter of a percentage point to a range of 1.75% to 2.00%. It was the second Fed rate cut this year.
But, Mr. Powell said, “what we think we are facing here is a situation which can be addressed, which should be addressed, with moderate adjustments to the federal funds rate,” noting that the US labor market was strong and inflation was likely to return to the Fed’s 2% annual goal.
For today, traders said the peso may weaken anew ahead of US data.
“The local currency might weaken further on bets that the second revision of the US GDP (gross domestic product) growth report [today] is expected to remain firm from the initial estimate,” the first trader said.
The first trader expects the peso to move within the P52.20-P52.40 range against the dollar, while the second trader sees it playing within the P52.10-P52.50 band. Meanwhile, Mr. Ricafort sees the peso trading from P52.00 to 52.30. — L.W.T. Noble with Reuters