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Peso strengthens on Fed rate-cut prospect

By Luz Wendy T. Noble

THE PESO rallied against the dollar on Wednesday amid market expectations of another rate cut by the US Federal Reserve, whose members were set to decide on policy hours later.

The peso closed at P50.885 against the greenback, 20.5 centavos stronger than a day earlier, according to data from the Bankers Association of the Philippines. It was also its strongest level for the trading day.

The peso opened at P51.07 and weakened to as much as P51.09 a dollar.

Trade volume rose to $1.05 billion from $1.036 billion on Tuesday

“The peso closed stronger today, among the best in three months, ahead of the widely expected decision by the Federal Reserve to cut its short-term interest rates,”

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in an email.

He also cited improved global risk appetite that resulted in gains in some emerging market currencies.

The Fed’s policy-setting committee was largely expected to announce a quarter-percentage-point cut to the overnight benchmark lending rate when it releases its latest policy statement, Reuters reported.

US Fed Chairman Jerome Powell will hold a news conference to elaborate on the decision half an hour later.

A rate cut would be the third this year, bringing the policy rate to a target range of 1.5% to 1.75%. Investors will also be tuning in for clues as to whether policy makers feel like they have acted appropriately to address the potential headwinds to the US economy or if more easing was needed.

Meanwhile, the US GDP report will be published hours before Fed officials wrap up a two-day policy meeting. The Fed cut rates in September after lowering borrowing costs in July for the first time since 2008.

The world’s biggest economy posted a 2% growth in the second quarter. The economy is expected to grow by less than 2.5% this year from 2.9% last year.

Mr. Ricafort expects the peso to trade from P50.70 to P51 a dollar today.

The post Peso strengthens on Fed rate-cut prospect appeared first on BusinessWorld.

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