Peso strengthens vs dollar after Fed policy decision

THE PESO appreciated against the dollar on Thursday after the US Federal Reserve kept rates unchanged at its policy meeting.

The local unit closed at P57.535 per dollar on Thursday, strengthening by 22.5 centavos from its P57.76 finish on Tuesday, Bankers Association of the Philippines data showed.

The peso opened Thursday’s session stronger at P57.70 against the dollar. Its intraday best was at P57.435, while its weakest showing was at P57.74 versus the greenback.

Dollars exchanged went down to $1.54 billion on Thursday from $1.89 billion on Tuesday.

“Following the Federal Reserve’s decision on Wednesday, which was perceived as dovish by investors, most Asian currencies, including the Philippine peso, strengthened against the dollar. This came after Fed Chair Jerome H. Powell dismissed the possibility of further rate hikes,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

The dollar was weaker across the board due to Mr. Powell’s comments after the Federal Open Market Committee’s meeting, Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion likewise said in a Viber message.

The dollar fell on Wednesday after the US Federal Reserve signaled it is still leaning toward eventual reductions in borrowing costs, but repeated that it wants to gain “greater confidence” that inflation will continue to fall before cutting rates, Reuters reported.

“In recent months, there has been a lack of further progress towards the Committee’s 2% inflation objective,” the Fed said in its statement.

The statement was largely as expected while Mr. Powell also said at a press conference that it is unlikely that the US central bank’s next move will be a hike, easing some concerns about the Fed potentially pivoting to a more hawkish stance.

The dollar index fell 0.44% to 105.85, after earlier reaching 106.49, the highest since April 16. A break above 106.51 would be the highest since early November.

For Friday, Mr. Asuncion said the market could continue to digest the Fed’s latest policy statement. He sees the peso moving from P57.20 to P57.80 per dollar, while Mr. Roces expects it to range from P57.40 to P57.80. A trader sees the peso moving between P57.35 and P57.70. — A.M.C. Sywith Reuters