Peso hits near one-month high on Fed cut bets

THE PESO appreciated to a near one-month high against the dollar on Tuesday after a US Federal Reserve official hinted at a rate cut this month.

The local unit closed at P58.58 per dollar on Tuesday, rising by 7.5 centavos from its P58.655 finish on Monday, Bankers Association of the Philippines data showed.

This was the peso’s best finish in nearly a month or since it closed at P58.26 per dollar on Nov. 8.

The peso opened Tuesday’s session slightly weaker at P58.69 against the dollar. Its intraday best was at P58.57, while its worst showing was at P58.705 versus the greenback.

Dollars exchanged inched down to $1.32 billion on Tuesday from $1.36 billion on Monday.

“The peso appreciated after dovish comments from Fed official Waller that the Fed has yet to deliver more rate cuts before reaching its neutral policy rate,” a trader said in an e-mail.

For Wednesday, the trader said the peso could appreciate further on expectations of softer US data. The trader sees the peso moving between P58.45 and P58.70 per dollar.

Federal Reserve Governor Christopher Waller, whose views are often a bellwether for US monetary policy, said on Monday that with inflation still forecast to fall to 2% he is inclined “at present” to support another interest rate cut later this month, Reuters reported.

“Policy is still restrictive enough that an additional cut at our next meeting will not dramatically change the stance of monetary policy and allow ample scope to later slow the pace of rate cuts, if needed, to maintain progress toward our inflation target,” Mr. Waller told a central bank symposium organized by the American Institute for Economic Research.

The Fed began reducing interest rates in September with a half-point reduction, following that with a quarter-point cut in November.

A further quarter-point cut in December has been expected, but recent inflation data raised concern that progress may have stalled. One key measure, the personal consumption expenditures price index stripped of food and energy costs, has been mired in a range from 2.6% to 2.8% since May, well above the Fed’s 2% target. — AMCS with Reuters