Peso weakens to 2-month low after Fed minutes --[Reported by Umva mag]

By Aaron Michael C. Sy, Reporter

THE PHILIPPINE peso fell to a two-month low against the dollar on Thursday after markets grew more confident about a patient approach by the US Federal Reserve to further monetary easing, based on the minutes of the Federal Open Market Committee’s (FOMC) September policy meeting.

It closed at P57.36 a dollar, weakening by 34 centavos from its P57.02 close on Wednesday, according to Bankers Association of the Philippines data posted on its website.

This was the peso’s weakest close since P57.515 on Aug. 7.

The peso opened at P57.15 against the dollar, appreciated to as much as P57.11 and weakened to as much as P57.36 against the greenback. Dollars exchanged inched down to $1.57 billion from $1.58 billion a day earlier.

“The dollar-peso closed higher on dovish bets on the US Federal Reserve after the release of the FOMC minutes,” a trader said by phone.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., in a Viber message also attributed the stronger dollar to the minutes of the US central bank’s meeting last month.

The US dollar rose to a 10-week peak against the yen on Thursday as markets grew more confident about a patient approach by the Fed to further monetary easing, even as a key inflation report loomed later in the day, Reuters reported.

The dollar index, which measures the currency against six key rivals including the yen, stuck close to an almost two-month high touched overnight, as traders further pared bets for US rate cuts this year after last week’s unexpectedly strong payroll data.

Minutes from the Fed’s latest meeting, released overnight, confirmed the central bank’s focus on keeping the labor market healthy.

Traders lay 85% odds on the Fed cutting rates by 25 basis points at its policy meeting on Nov. 7, and a 15% probability of no change, the CME Group’s FedWatch Tool showed.

A week earlier, the probability of a quarter-point cut stood at 65%, with 35% odds for a half-point reduction.

A “substantial majority” of US Federal Reserve officials last month supported a half-point rate cut to start the turn toward easier monetary policy, but there appeared more universal agreement that the initial move would not commit the Fed to any particular pace of rate reductions in the future, minutes of the two-day policy meeting showed on Wednesday.

The minutes provided further details on the breadth of opinion within the Fed as policy makers approved a rate cut of a size usually reserved for moments when the central bank is worried the economy is slowing fast and needs the support of looser financial conditions.

Supporters of the half-point cut “observed that such a recalibration of the stance of monetary policy would begin to bring it into better alignment with recent indicators of inflation and the labor market,” according to the minutes of the Sept. 17-18 session, at which the Fed lowered the benchmark policy rate to 4.75% to 5% from 5.25% to 5.5% it had maintained since July 2023.

The trader expects the peso to trade at P57 to P57.50 a dollar, while Mr. Ricafort sees it at P57.25 to P57.35.

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