THE PESO rebounded to return to the P51-per-dollar level on Tuesday.

THE PESO recovered against the dollar on Tuesday to return to the P51 level as market participants took profit ahead of the policy meeting of the US central bank.

The local currency closed yesterday’s session at P51.99 versus the greenback, 15.5 centavos stronger than the P52.145-per-dollar finish on Monday.

The peso opened the session at its intraday low of P52.20 per dollar. However, it bounced back to close the session at its best showing for the day.

Dollars traded thinned to $763.91 million from the $995.73 million that changed hands the previous day.

Traders attributed the peso’s rebound to market players’ position taking ahead of the policy meeting of the US Federal Reserve.

“The market is not expecting a rate cut…,” a trader said in a phone interview. “The expectation is they will be dovish and will have two rate cuts for the year. The first one should be in July.”

The Fed’s policy-making Federal Open Market Committee (FOMC) is widely seen to keep benchmark rates steady during its June 18-19 meeting, although the central bank is seen to trim its interest rates sometime this year.

“The peso strengthened as market participants bet on some dovish shift from the US Federal Reserve meeting this week despite expectations of keeping US policy settings steady,” another trader said in an e-mail.

Meanwhile, the first trader said the peso strengthened 10 minutes before closing following comments from Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno.

“The BSP Governor issued a statement that the Philippines has a lot of idle dollars due to hefty flows. We have a surplus of dollars, which means weaker dollar for the Philippines,” he said.

“Actually, maraming idle na dollars kami ngayon. Hindi namin nagagastos (We have a lot of idle dollars we’re not spending),” Mr. Diokno said in a chance interview with reporters yesterday when asked if he’s willing to allow the peso to stay on its level.

“The inflow of tourists is very hefty also. Then FDIs (foreign direct investments) are also there. Walang problema ‘yan (There’s no problem),” he added.

Minutes ahead of Mr. Diokno’s comments, the trader said the peso was trading at P52.09 per dollar.

For today, the first trader expects the peso to trade between P51.90 and P52.20 versus the dollar, while the other gave a P51.90-P52.10 range.

“Market players will be on a wait and see stance ahead of the policy meeting. Most likely, we will see a quiet trading [today],” the first trader said.

Meanwhile, most emerging Asian currencies held in a narrow range on Tuesday, reflecting investors’ caution ahead of a US Federal Reserve meeting that is expected to lay the groundwork for a rate cut later this year.

“With scant data releases and no significant developments on the trade front, the mood in Asia will likely remain cautious with investors awaiting the FOMC meeting and possible adjustments to the dot plots before taking on substantial bets,” ING said a note.

Leading declines in the region, the Thai baht shed 0.2% against the greenback, while the Singapore dollar was largely unchanged.

Investor focus will also turn to a slew of regional central bank meetings later this week. — K.A.N. Vidal with Reuters

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