Peso faces volatile trading

Posted on March 25, 2013

THE PESO may benefit from the quarter-end window dressing in the stock market and strengthen against the dollar this week but it remains prey to market volatility due to Cyprus’ financial woes.

CYPRUS’ problems have weakened the peso as investors have dumped risky assets. -- BW file photo
The local unit shed 22 centavos last Friday to finish at P40.84 per dollar against its P40.62-per-dollar close the previous week.

The local currency had weakened against the dollar since Wednesday as investors abandoned risky assets after Cypriot legislators on Tuesday rejected conditions for a €10-billion lifeline to prop up its tottering banks.

The peso is expected to trade within the P40.75- to P40.95-per-dollar band this week.

“The peso may firm up against the dollar [this] week due to traditional quarter-end window dressing of stock portfolios,” a trader said in a phone interview last Friday.

Window dressing is the practice of buying of high-performing stocks at the end of the month, the quarter or the year to improve the appearance of a portfolio.

Stock purchases are usually accompanied by peso purchases by foreign investors, who have been net buyers since the start of the year.

Strong demand for the peso, however, may be offset by risk aversion among market players due to uncertainties in Cyprus, another trader said in a separate phone interview.

Cypriot lawmakers on Saturday agreed to impose a one-off 20% tax on deposits of more than €100,000 at the Bank of Cyrus -- the country’s number one lender -- and a 4% tax on deposits over €100,000 at other banks. However, these revenue-raising measures, are still up for euro zone finance ministers’ approval.

The Mediterranean country has to raise €5.8 billion by Monday to secure a €10-billion financial aid from the European Union, European Central Bank and the International Monetary Fund. A financial collapse will force it out of the euro zone. -- A. R. R. Gregorio