Peso strengthens further as tax bill gains traction

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THE PESO continued its rally against the dollar on Wednesday on the back of positive sentiment on the passage of the Philippine tax reform bill.

The local unit finished at P50.27 against the greenback yesterday, strengthening from its P50.35 close on Tuesday.

The peso opened slightly weaker at P50.40, while its intraday low was seen at P50.44. Its best showing for the day was at P50.24.

Dollars traded increased to $728.90 million on Tuesday from $696.45 million in the previous session.

“The peso continued its move higher and that has been the trend lately. Looks as if it’s going to continue with a move lowering the dollar,” a trader said in a phone interview.

Traders attributed the peso’s climb to positive sentiment in the market as the passage of the first tax reform package nears.

“The market has been trying to monitor for directions going forward with the outcome of the bicameral meeting for the tax reform bill. That would be up by the first or second week of December,” the trader added, noting that if the revenue target will be close to the amount set by the Finance department is something that would push the peso upwards.

However, the peso’s ascent was tempered by morning trading, as the speech of the incoming US Federal Reserve chair Jerome H. Powell was considered hawkish.

“The peso traded stronger, although initially it opened weaker because overnight, we heard some hawkish remarks from Powell’s speech. It boosted the sentiment on the rate hike this December,” another trader said, noting that upbeat US economic data on non-deliverable fund also tempered the peso’s rise.

“I think the movement of the peso intensified when it broke the P50.46 average. At that point, we would see a bounce, but what happened is the peso breached it so I guess it triggered more selling after,” the first trader noted.

For today, a trader expects the peso to play within the P50.10-to-P50.50 level, while the other trader gave a slimmer range of P50.15 to P50.45.

Meanwhile, most Asian currencies moved sideways on Wednesday, as the market focused on progress in President Donald J. Trump’s tax cut plan while the South Korean won touched multi-year highs, unfazed by yet another show of aggression from the North.

US Senate Republicans pushed the president’s tax-cut bill through in an abrupt, partisan committee vote that set up a full vote by the Senate as soon as Thursday.

The greenback gained further traction against the yen after data showed a robust labor market propelled US consumer confidence to a near 17-year high in November.

The dollar index, however, which measures the greenback against a basket of six major currencies, was slightly lower at 0425 GMT.

Meanwhile, North Korea conducted its first missile test since September with a new type of intercontinental ballistic missile that it said could reach all of the US mainland.

The dollar also drew heart from Mr. Powell, Mr. Trump’s choice to lead the US Federal Reserve, defending plans to potentially lighten regulation of the financial sector during a controversy-free confirmation hearing.

In Asia, the South Korean won gained as much as 0.3% to push past a two-and-a-half year high, riding on expectations that the Bank of Korea will raise interest rates at its meeting on Thursday. — KANV with Reuters

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