THE PESO retreated against the dollar on Thursday, ending a five-day rally, following hawkish hints from the US Federal Reserve and as the Philippine central bank delivered a sixth straight rate cut.
The local unit dropped by 13.5 centavos to close at P57.996 versus the greenback from its P57.861 finish on Wednesday, data from the Bankers Association of the Philippines showed.
The peso opened Thursday’s trading session slightly weaker at P57.88 against the dollar, which was already its intraday best. Its worst showing was at P58 against the greenback.
Dollars traded rose to $1.61 billion from $1.461 billion on Wednesday.
The local currency declined on “renewed dollar demand following the release of Federal Open Market Committee minutes, which showed that interest rate hikes are still on the table,” the first trader said in a phone interview.
Federal Reserve policymakers were in near-unanimous agreement to keep interest rates on hold at their meeting last month, but remained split over their next steps, with “several” open to rate hikes if inflation remains elevated, others inclined to support further cuts if inflation recedes as they expect, and the full table grappling with the emerging implications of artificial intelligence for the economy, Reuters reported.
The split evident in the readout from Fed Chair Jerome H. Powell’s third-to-last meeting as head of the US central bank underscores the challenge ahead for former Fed Governor Kevin Warsh, President Donald J. Trump’s pick to take over from Mr. Powell in May, in convincing the policymaking group to support the rate cuts Mr. Warsh and Mr. Trump say are needed.
The Federal Open Market Committee’s decision last month to hold its benchmark interest rate in the 3.5%-3.75% range was shared by “almost all” of its policymakers, according to the Jan. 27-28 meeting minutes released on Wednesday.
The peso also weakened as the Bangko Sentral ng Pilipinas’ (BSP) latest cut narrowed its rate differential with the Fed, the second trader said in an e-mail.
The Monetary Board on Thursday lowered the target reverse repurchase rate by 25 basis points (bps) to 4.25%, as expected by all 16 analysts in a BusinessWorld poll.
This brought cumulative cuts since August 2024 to 225 bps.
With this, the difference between the BSP’s key rate and the Fed is now at just 50 bps.
For Friday, the second trader said the peso could recover ahead of a potentially softer US gross domestic product report overnight.
The first trader sees the peso moving between P57.90 and P58.20 per dollar as players digest the BSP’s latest policy signals, while the second trader expects it to range from P57.85 to P58.10. — A.M.C. Sy with Reuters