Peso rebounds after Fed surprises with 50bps cut

The Philippine peso rebounded against the US dollar on Wednesday, following a surprise rate cut by the Federal Reserve.

The local currency gained 13.9 centavos to close at P50.551:$1 from Tuesday's close of P50.69:$1.

In a text message, BDO Unibank Inc. chief market strategist Jonathan Ravelas attributed Wednesday's appreciation to the latest Fed move: "Knee-jerk reaction to Fed cut."

The US Federal Reserve on Tuesday slashed interest rates by 50 basis points, in efforts to contain the economic impact of the coronavirus disease 2019 (COVID-19).

"The market reaction to the Fed's decisive action is worrying for investors," Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney, was quoted as saying in a Reuters report.

"There is now a question over the ability of monetary policy to halt plummeting asset prices. The seeming ineffectiveness of further monetary easing will almost certainly lead to further calls on governments to push the fiscal stimulus button."

Moving forward, BDO's Ravelas said the peso is likely to trade within the P50.50-P50.70:$1 levels.