Peso climbs on ‘dovish’ new US central bank chair

THE PESO strengthened against the dollar on Thursday as traders reacted to reports of the appointment of a “dovish” new US Federal Reserve chair.

The local currency closed at P51.42 against the dollar as trading resumed yesterday, gaining 19 centavos from the P51.61-perdollar finish on Monday.

The peso opened the session stronger at P51.58 against the dollar, which was also the unit’s low for the day. It reached an intraday peak of P51.49.

Dollars traded on Thursday totalled $562.4 million, up from Monday’s $421.8 million.

Traders attributed the weakening of the dollar mainly to reports that current Fed governor Jerome H. Powell — a candidate considered to be dovish — will be appointed by US President Donald J. Trump to head the US central bank to replace Fed chair Janet L. Yellen.

“Powell is widely perceived as dovish, suggesting that there might not be a drastic acceleration in the pace of US interest rate normalization,” Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines (Landbank), said in an e-mail.

A trader agreed, saying that “unlike the other hawkish candidates such as [John B.] Taylor, Gov. Powell’s appointment may

blur the possibility of another interest hike rate at the end of the year.”

In a Wall Street Journal report, the White House has already notified Mr. Powell that Mr. Trump intends to nominate him for the Fed chairmanship, replacing the incumbent Ms. Yellen whose four-year term will expire by February.

Mr. Trump is expected to make the announcement today before he departs US for an Asian trip.

Aside from the possible appointment of Mr. Powell, the first trader attributed the peso’s uptick to accumulated remittances during the two-day holiday.

Another trader, meanwhile, said the good performance of the local bourse yesterday may have also boosted the peso.

On Thursday, the Philippine Stock Exchange index breached the 8,500 mark, closing at another all- time high of 8,516.02.

“News about the delay in the tax bill announcement also weighed down on the dollar, despite the hawkish tone of the US monetary policy meeting and upbeat US ADP employment,” Mr. Dumalagan also noted.

For today, the traders expect the peso to move between P51.25 and P51.60 against the dollar.