Peso climbs on improved sentiment on US-China

THE PESO climbed on Tuesday amid positive market sentiment on the back of seemingly improving US-China ties ahead of the signing of the phase one trade deal.

The local unit closed at P50.581 per dollar on Tuesday, appreciating by 7.9 centavos from its P50.66-a-dollar finish on Friday.

Markets were closed on Monday following the eruption of Taal Volcano.

The peso opened Tuesday’s session at P50.40 versus the greenback. Its weakest showing was at P50.63, while its intraday best was at P50.37 to a dollar.

Dollars traded climbed to $1.408 billion on Tuesday from the $1.152 billion seen on Jan. 10.

An analyst and trader attributed the peso’s strength to positive headlines about the relationship of the world’s two biggest economies.

“The peso appreciated amid optimism ahead of the signing of first-phase US-China trade deal and after US removed China’s designation as a currency manipulator,” a trader said in an e-mail.

This also boosted Asian currencies, according to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

“The peso exchange rate closed stronger today versus the dollar, among the strongest in two years, ahead of the signing of the US-China phase one trade deal and after the US lifted the designation of China as a currency manipulator,” Mr. Ricafort said on Tuesday.

For today, the trader sees the peso moving around the P50.50-P50.70 level, while Mr. Ricafort gave a forecast range of P50.30-50.60 a dollar.

The Chinese yuan firmed to its strongest level in six months on Tuesday, leading most other Asian currencies higher, as the US Treasury department removed its designation of China as a currency manipulator.

The yuan strengthened as much as 0.4% to 6.8661 per dollar and was poised for its sixth straight session of gains.

Monday’s announcement comes ahead of the signing of a Phase 1 trade deal between the United States and China due on Jan. 15, expected to ease tensions between the two countries.

“While there had been little changes to Asia economies’ participation to the US FX (foreign currency) report watchlist, this lifting of China’s currency manipulator label may see to some relief for USD/Asian declines which would be beneficial to regional markets,” said Jingyi Pan, market strategist at IG.

The US Treasury report cited continued concerns about the currency practices of nine other countries, including Malaysia, Singapore and South Korea.

The South Korean won advanced 0.2%, while the Malaysian ringgit and the Singapore dollar were little changed.

Taiwan’s dollar was up 0.2% even though the US report said the country was close to triggering thresholds to be added to the currency monitoring list.

A senior official of Taiwan’s central bank told Reuters on Tuesday that the bank has never used swaps to intervene in the currency market, after the Treasury department cited an analyst report suggesting the island was doing so.

Adding to the cheer in Asian markets, China’s trade data for December beat forecasts with exports rising for the first time since July 2019 and imports rising 16.3% from a year earlier. — LWTN with Reuters