THE PESO plummeted to the P58 level on Thursday, hitting a near six-month low versus the greenback, following hawkish comments from US Federal Reserve Chair Jerome H. Powell that dampened hopes for a September rate cut.
The local unit plunged by 74 centavos to close at P58.32 against the dollar from its P57.58 finish on Wednesday, Bankers Association of the Philippines data showed. This was the peso’s weakest close in nearly six months or since it ended at P58.34 per dollar on Feb. 4.
The peso opened Thursday’s session weaker at P57.86 against the dollar. Its intraday best was at just P57.85, while its worst showing was at P58.40 against the greenback.
Dollars exchanged surged to $2.6 billion on Thursday from $1.86 billion on Wednesday.
“The dollar-peso closed higher on strong US data and hawkish comments from Mr. Powell following the Fed’s decision to hold,” the first trader said in a phone interview.
The dollar’s strength overnight after the Fed kept rates unchanged for a fifth straight meeting caused the peso to open the session weaker, the second trader said in a text message.
“This strong dollar opening set the stage for the rest of the day, as the dollar-peso spot rate soared to a high of P58.40. If I were to hazard a guess on the cause, it’s likely due to panic from the strong opening in the morning,” the second trader added.
For Friday, the first trader sees the peso moving between P58.10 and P58.50 per dollar, while the second trader expects it to range from P58.30 to P58.50.
The dollar flirted with a two-month peak after Mr. Powell stuck to his patient approach on rates in a closely watched policy decision and offered little insight on when they could be lowered, Reuters reported.
The greenback was also on track for its first monthly gain for the year, bolstered by a hawkish Fed and US economic resilience, with uncertainty over tariffs beginning to ease given recent trade deals struck by Washington.
Against a basket of currencies, the dollar dipped slightly to 99.67, but was not far from a two-month peak hit in the previous session. The dollar index was set for a monthly gain of about 3%.
The Federal Reserve’s decision to avoid signaling imminent rate cuts despite relentless political pressure underscores its prevailing caution and has forced investors to dial back expectations for an easing at the next policy meeting.
The Federal Open Market Committee held interest rates on Wednesday in a split decision that gave little indication of when borrowing costs might be lowered. It also drew dissent from two Fed governors, both appointees of US President Donald J. Trump who agree with him that monetary policy is too tight.
The overnight policy rate controlled by the Fed remains in a 4.25%-4.5% range. The last rate cut was in December and the Fed hiked rates from March 2022 to July 2023 to fight inflation.
The lack of a clear signal that the Fed was warming to interest rate cuts as soon as the next meeting in September lifted Treasury yields and the dollar in late trade and turned stocks lower.
Fed funds futures traders are pricing in a 46% probability of a rate cut by September, down from about 65% a day ago, according to the CME Group’s FedWatch Tool. They are no longer pricing in two full 25 basis point cuts by yearend as they were in recent days.
Mr. Powell was careful to keep his options open on monetary policy. “We have made no decisions about September,” he said in a press conference. He also noted there was still time to take in a wide range of data before the central bank next met in mid-September.
Mr. Powell has come under intense pressure from the White House to lower interest rates, with Mr. Trump regularly berating him for being too slow to lower borrowing costs. — Aaron Michael C. Sy with Reuters
