Peso weakens as dollar rebounds vs most units
THE PESO weakened on Wednesday as the dollar regained its dominance across global markets.
The local unit closed at P52.15 against the greenback on Wednesday, declining by 17 centavos from its P51.98-to-a-dollar finish on Tuesday.
The peso opened slightly weaker at P52.05 versus the greenback. Its weakest point was recorded at P52.195, while its intraday best logged at P52.05 against the dollar.
Dollars traded on Wednesday dropped to $1.436 billion against the $1.495 billion seen on Tuesday.
“The dollar’s strength was evident across all markets. Yield take-up is getting more attractive with US Treasury bonds yields bouncing back,” one trader said, adding that positive developments in the US-China trade war also boosted the dollar against most currencies.
US Treasury yields climbed to fresh three-week peaks on Tuesday, tracking German bonds, as risk appetite continued to improve amid diminishing US-China trade tensions and expectations of fiscal stimulus measures from Germany, Europe’s largest economy.
Washington and Beijing could be back at the negotiating table sometime this month.
US yields rose for a second straight session, with investors also awaiting a key monetary policy meeting at the European Central Bank on Thursday. Investors expect the ECB to cut interest rates, but may introduce some form of compensation for banks to offset the unwelcome side effects of negative interest rates.
“The greenback gained on news that the German government is considering to inject fiscal stimulus which driven off some appetite for the euro over the US dollar,” another trader said.
Germany’s 30-year government bond yield briefly turned positive on Tuesday, ahead of the ECB meeting and bolstered by possible stimulus measures from its government.
German Finance Minister Olaf Scholz said on Tuesday the government can counter a possible economic crisis by injecting billions of euros into the economy, signaling readiness for a big stimulus package if the economy tips into recession.
For today, the first trader said the peso may continue to weaken due to optimism on a US-China trade deal and ahead of US consumer price index data. The trader expects the local unit to move around the P52.00-P52.40-per-dollar band.
“The local currency might weaken further due to broad market expectations of dovish cues from the European Central Bank policy meeting [today]. Exchange rates might move within the P52.00 and P52.30 range,” the second trader said. — Luz Wendy T. Noble with Reuters
