Peso strongest in 16 months as dollar weakens, Fed signals easing


Posted at Jun 25 2019 08:42 PM | Updated as of Jun 25 2019 10:07 PM

MANILA - The Philippine peso touched its strongest level since February last year as the dollar fell against a basket of currencies amid the prospect of monetary easing by the Federal Reserve. 

The peso closed at P51.365 against the greenback, after the Fed signaled last week it would cut interest rates before year-end.

Data from the Bangko Sentral ng Pilipinas showed the peso averaged 51.7856 to the dollar in February 2018.

Analysts said the peso is also benefitting from a strong balance of payments surplus

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The Fed held interest rates steady last week on mounting worries about an economic slowdown and the fallout from tariff wars between the United States and China. 

The US central bank said it "will act as appropriate to sustain" the US economy's expansion.

"We expect the Fed's pre-emptive cuts to temporarily weigh on the USD, especially versus G10 currencies, as the US rates advantage compresses amid an environment of slowing global growth," said Marvin Barth, foreign exchange strategist at Barclays.

"However, the Fed's ability to support an extended US expansion stands in contrast to clear sustained slowing – and rising risks – in China and Europe, implying a USD rebound in 2020."

Fed Chairman Jerome Powell was due to speak later on Tuesday (early morning Wednesday Manila time).

Investors are also waiting to see whether US President Donald Trump and Chinese President Xi Jinping will at least call a truce in their trade war when they meet at a summit of the G20 major economies in the Japanese city of Osaka late this week.

Trump considers his meeting with Xi an opportunity to "maintain his engagement" and see where China is on their trade dispute, a senior US official said on Monday.

- with reports from Reuters