Peso rebounds on dovish Fed

BW FILE PHOTO

THE PESO rebounded versus the greenback on Thursday as the US Federal Reserve renewed its commitment to keep rates low to support the recovery of the world’s largest economy.

The local unit closed at P48.68 versus the dollar yesterday, appreciating by 4.5 centavos from its P48.725 close on Wednesday, data from the Bankers Association of the Philippines showed.

The peso opened Thursday’s session at P48.64 per dollar. Its weakest showing was at P48.68 while its intraday best was at P48.62 versus the greenback.

Dollars traded dropped to $748.3 million from $793.7 million on Wednesday.

The peso strengthened after the Fed said it would remain accommodative, a trader said in an email.

Fed Chairman Jerome Powell said the recent uptick in US inflation will not change their pledge to leave the benchmark overnight interest rate near zero to support the virus-stricken economy, Reuters reported.

“We are committed to giving the economy the support it needs to return as quickly as possible to a state of maximum employment,” Mr. Powell said at the close of the US central bank’s two-day policy review.

The Fed’s higher economic growth and employment estimates also boosted the peso, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.

Fed officials said they expect US gross domestic product to expand by 3.3% and 2.2% in 2022 and 2023, beyond the estimated long-term potential growth of 1.8%.

Meanwhile, the Fed sees unemployment settling at 4.5% by end-2021, better than the 6.4% outlook it gave in June last year.

For Friday, the trader gave a forecast range of P48.50 to P48.70 per dollar, while Mr. Ricafort expects the local unit to move within the P48.63 to P48.73 levels. — LWTN with Reuters