Peso rebounds vs the dollar on profit taking, dovish Fed comments

BW FILE PHOTO

THE PESO rebounded versus the dollar on Tuesday on profit taking and dovish comments from a US Federal Reserve official.

The local unit closed at P58.865 per dollar on Tuesday, gaining 13.5 centavos from its finish of P59 on Monday, based on Bankers Association of the Philippines data.

The peso opened Tuesday’s session stronger at P58.97 against the dollar. Its worst showing for the day was at P59, while its intraday best was at P58.83 versus the greenback. 

Dollars exchanged rose to $642.35 million on Tuesday from $400 million on Monday.

“The peso strengthened slightly due to profit taking near the P59 level,” a trader said in an e-mail.

The exchange rate corrected after declining for three straight trading days due to dovish comments from a Fed official, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Fed Vice Chairman Lael Brainard said on Monday the US central bank sees the need for restrictive monetary policy to lower inflation, but the pace of rate increases will remain “data-dependent” as the US central bank monitors domestic and global risks. 

Ms. Brainard said the 300 basis points in hikes fired off by the Fed to date were beginning to slow the economy, with their impact not fully felt yet.

“The peso was also stronger after the global crude oil prices corrected lower from new one-month highs,” Mr. Ricafort added. 

Global oil slid more than 1% on Tuesday, extending losses of nearly 2% in the previous session. Brent crude fell $1.41 or 1.5% to $94.78 a barrel by 0820 GMT, while US West Texas Intermediate crude dropped $1.54 or 1.7% to $89.58.

The trader said the peso may continue to climb against the dollar as global crude prices are expected to decline amid new lockdowns in China, which could dent fuel demand.

For Wednesday, both the trader and Mr. Ricafort expect the local unit to move within P58.75 to P58.95 per dollar. — KBT