Peso up on dovish Fed remarks

Font Size

THE PESO appreciated anew yesterday, reacting to a weaker dollar amid dovish comments from a Federal Reserve official on the next policy moves in the United States.

The local unit picked up for a four straight day as it finished at P51.095 versus the dollar on Wednesday, stronger than the P51.14-per-dollar logged the previous day. This is the peso’s best showing since a P51.08 close on Aug. 25.

The peso opened at P51.14 against the greenback. Its intraday low was at P51.19, while it climbed to P51.08 as its best showing during the session.

“The peso appreciated yesterday after Fed’s Brainard expressed concerns about increasing interest rates given low inflation in the US economy,” the first trader said via e-mail.

Reuters reported that Fed Governor Lael Brainard said the US central bank should hold off a fresh interest rate hike until it is sure that inflation will return above 2%.

The peso was the second best performer compared to a host of Asian currencies yesterday as it appreciated by 11 basis points next to the Malaysian ringgit, according to Reuters.

In general, all currencies in the region picked up strength against the dollar expect for the Korean won and the Singapore dollar.

Year-to-date, the peso is down by 2.67%, while all other Asian currencies grew stronger versus the greenback.

Apart from the Fed’s statements, another observer attributed the dollar’s continued depreciation to the global market developments that have weighed on investor appetite towards the dollar, as they consider other currencies as safe haven amid heightened volatility.

“There’s a lot of external turbulence making traders less optimistic. North Korea tensions, US’s hurricane Irma including the looming US debt ceiling showdown are some of the rough patches today, just to name the major ones,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines.

“The peso and the innate strength of the Philippine macroeconomy, on the other hand, have been positive for market players.”

Dollars traded yesterday totalled $468.8 million, slightly lower than the $511 million that exchanged hands on Tuesday.

Traders expect the peso to move within the P51 to P51.20 range for Thursday. In particular, the first trader said the peso could clip its rally today if non-manufacturing data in the US turn out to be strong. On the other hand, Mr. Asuncion said the peso could log “a bit stronger than P51” to a dollar for the next trading day. — Melissa Luz T. Lopez