THE PESO strengthened further against the dollar on Tuesday as the market stayed on the sidelines ahead of the release of the minutes of the US central bank’s latest policy meeting.
The local unit closed yesterday’s session at P52.475 versus the greenback, 11.5 centavos stronger than Monday’s close of P52.59.
The peso opened the session slightly stronger at P52.57 per dollar, soaring to as high as P52.47 intraday. Meanwhile, its worst showing stood at P52.61 against the greenback.
Trading volume climbed to $1.102 billion from the $1.084 billion that switched hands the previous day.
“We saw heavy selling of the dollar-peso…maybe on position trimming since after we saw heavy buying for the past few days,” a foreign exchange trader said in a phone interview.
The trader added that market participants opted to stay on the sidelines ahead of the remarks of US Federal Reserve officials last night as well as the release of the Federal Open Market Committee (FOMC) meeting minutes.
The US central bank kept its rates steady at 2.25-2.5% during its April 30-May 1 policy meeting despite pressure from US President Donald Trump to ease policy rates to stimulate the economy.
“We have an economy where the expansion is continuing, growth is at a healthy level, the labor market is strong, we see job creation, we see wages moving up. Inflation is low, which gives us the ability to be patient,” Fed Chair Jerome Powell told reporters following that meeting.
“There will be Fed speakers tonight and FOMC minutes to be released on Thursday. Maybe the market is trying to trim their positions to be on the sidelines regarding the possible comments or headlines that would move the dollar either way,” the trader said yesterday.
The trader added that the market is also awaiting developments on the US’ relations with China and Iran.
Meanwhile, another trader said the peso strengthened due to “continued profit-taking” amid some caution ahead of the release of the FOMC minutes which might cause huge swings on the greenback.
For today, the first trader expects the peso to move between P52.35 and P52.65 against the dollar, while the other trader gave a P52.35-P52.55 range.
Meanwhile, Security Bank Corp. chief economist, expects the peso to decline to P53 against the greenback by the end of the second quarter, given the observed peso weakness following the recent cut in reserve requirement ratio as well as the “pro-growth” stance of the Bangko Sentral ng Pilipinas, among others.
“With policy moves out of the way, the narrative will shift towards the US-China trade war,” Mr. Roces said in a note sent to reporters yesterday.
Mr. Roces added that the peso will likely settle at the P53.50-per-dollar level at the end of the third and fourth quarters. — K.A.N. Vidal
