Home Economy Peso climbs as US data bolster Fed easing view

Peso climbs as US data bolster Fed easing view


THE PESO rose to an over one-month high against the dollar on Monday after softer-than-expected US jobs data supported bets of US Federal Reserve rate cuts within the year.

The local unit closed at P58.502 per dollar on Monday, inching up by 2.8 centavos from its P58.53 finish on Friday, Bankers Association of the Philippines data showed.

This was the peso’s strongest finish since its P58.42 close on May 29.

The peso opened Monday’s session slightly weaker at P58.55 against the dollar. Its weakest showing was at P58.60, while its intraday best was at P58.47 versus the greenback.

Dollars exchanged rose to $1.07 billion on Monday from $836 million on Friday.

“The peso strengthened after the softer US employment report bolstered expectations of a US policy rate cut in September,” a trader said in an e-mail.

The dollar was generally weaker following the jobs report, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar remained on the back foot following surprisingly soft US payrolls data on Friday, which boosted bets for the Fed to soon start cutting interest rates, Reuters reported.

The dollar index, which measures the US currency against the euro, sterling, yen and three other major rivals, was flat at 104.95, licking its wounds after a nearly 1% slump last week, exacerbated by Friday’s softer US jobs market reading.

Traders currently set about 76% odds for a rate cut at the Fed’s September meeting, up from 64% a week ago, according to the CME Group’s FedWatch Tool. A subsequent cut is predicted by December.

US employment increased solidly in June, but government and healthcare services hiring made up about three-quarters of the payrolls gain and the unemployment rate hit a 2-1/2-year high of 4.1%, pointing to a slackening labor market that keeps the Federal Reserve on course to start cutting interest rates soon.

Nonfarm payrolls increased by 206,000 jobs last month, lifted by government hiring, the Labor department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls would increase by 190,000 last month, with the unemployment rate unchanged at 4%.

The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.5% range since last July.

For Tuesday, the trader said the peso could weaken due to market caution ahead of Fed Chair Jerome H. Powell’s congressional testimony on July 9-10.

The trader expects the peso to move between P58.35 and P58.60 per dollar, while Mr. Ricafort sees it ranging from P58.40 to P58.60. A second trader said in a phone interview that the local unit could trade from P58.40 to P58.70 versus the greenback. — AMCS with Reuters

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