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Peso rises further on hopes of less hawkish Fed

THE PESO climbed to a fresh one-month peak versus the dollar on Thursday on hopes that the US central bank will begin considering smaller hikes by December. — BW FILE PHOTO

THE PESO on Thursday rose to its strongest level in over a month against the dollar amid growing hopes of slower rate hikes by the US Federal Reserve.

The local unit closed at P58.22 per dollar on Thursday, gaining 21 centavos from its P58.43 finish on Wednesday, Bankers Association of the Philippines data showed.

This is the peso’s best close in over a month or since it finished at P58 a dollar on Sept. 21.

The peso opened Thursday’s session at P58.25 per dollar. Its weakest showing was at P58.455, while its intraday best was at P58.09 against the greenback.

Dollars exchanged surged to $1.077 billion on Thursday from $845.5 million on Wednesday.

“The peso appreciated amid growing expectations that the Federal Reserve will start to slow down US interest rate increases,” a trader said in an e-mail.

Weakening economic data in the United States affirmed expectations that the Fed might begin to consider smaller rate hikes by next month.

Data on Wednesday showed sales of new US single-family homes dropped in September and data for the previous month was revised lower, supporting the view that Fed rate increases are already working their way into the world’s largest economy.

Last week, San Francisco Federal Reserve President Mary Daly said the US central bank must not “over-tighten” in its quest to fight inflation to help avoid an “unforced” economic downturn.

The market widely expects the Fed to raise rates by 75 basis points (bps) for the fourth straight time at its Nov. 1-2 meeting and to continue hiking until next year. The Fed has increased borrowing costs by 300 bps since March.

The dollar rose on Thursday, after earlier falling to a one-month low in against a basket of currencies amid hopes that the Fed will become less hawkish to avoid tipping the US economy into a recession.

Against a basket of currencies, the dollar went up 0.16% to 109.73, rebounding after falling to a one-month low of 109.53 earlier in the day.

Meanwhile, the peso continued to strengthen on Wednesday amid an increase in remittances from overseas Filipinos ahead of the long weekend, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The peso was also stronger after benchmark index gained for the fourth straight day, he said.

The Philippine Stock Exchange index rose by 109.05 or 1.78% to end at 6,230.58 on Thursday, while the broader all shares index gained 39.11 points or 1.2% to close at 3,282.38.

“The peso also continued to appreciate after global crude oil prices still lingered near nine-month lows,” Mr. Ricafort added.

Brent crude rose 23 cents or 0.2% to $95.92 a barrel as of 0810 GMT, while US West Texas Intermediate crude fell 17 cents or 0.2% to $87.74.

For Friday, the peso may weaken on expectations of a stronger US personal consumption expenditure report, the trader said.

The trader sees the peso moving between P58.10 and P58.30 per dollar on Friday, while Mr. Ricafort gave a slightly higher forecast range of P58 to P58.30. — K.B. Ta-asan

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