Peso rebounds ahead of Fed review

THE PESO recovered on Tuesday as market players sold dollars to take position ahead of a possible interest rate cut by the US central bank.

The local unit closed the session at P50.89 versus the greenback, up 20 centavos from its P51.09 finish on Monday.

The peso opened the session at P51.02 against the dollar. It slipped to as low as P51.065 intraday, while it closed the session at its best showing.

Trading volume climbed to $1.124 billion from the $767.25 million that changed hands the previous day.

A trader said the peso strengthened versus the dollar as it broke the support level of P50.92 on aggressive selling in the afternoon session.

“As for the reason, it’s not very clear since so far dollar is mostly flat versus most currencies. I think it’s still reduction of position ahead of the FOMC (Federal Open Market Committee) meeting on Thursday,” the trader said in a phone interview on Tuesday.

The US Federal Reserve is widely expected to trim rates by at least 25 basis points when its policy-making FOMC meets on July 30-31.

“Another thing the market is awaiting is the BSP (Bangko Sentral ng Pilipinas) meeting, which will affect the peso. Market expectation is for a cut, but lately we’ve heard from one (Monetary Board) member that they might not cut for now,” the trader said.

MB member V. Bruce J. Tolentino said last week in a Bloomberg interview that “there’s no rush” to cut interest rates, and that the BSP can wait for more economic data before easing monetary policy again.

The second trader added that yesterday’s trading was still driven by flows, as market participants sell dollars and buy peso-denominated bonds.

For today, the first trader expects the peso to trade between P50.72 and P51.10 versus the dollar, while the other gave a P50.90-P51.30 range. — K.A.N. Vidal