Peso strengthens ahead of Fed decision

Posted on April 27, 2016

THE PESO ended stronger against the dollar yesterday due to a fall in home sales in the United States, but this could be short-lived as market players anticipate the decision of the Federal Reserve on monetary policy alongside other key economic data.

File photo of Peso notes. BW
On Tuesday, the local unit gained nine centavos to P46.76 against Monday’s close at P46.85 as it improved throughout the day’s trading.

The peso opened at P46.90 against the greenback, having started at about the same level as the previous day’s close. The currency touched its weakest intraday level at P46.94 but improved to hit P46.74, its best showing against the dollar during the day.

“The peso appreciated [yesterday], as investors took profit after four days of dollar rally. Weaker-than-expected US new home sales partly contributed to the peso’s strength,” an analyst said by e-mail.

“Exchange rate movements were minimal, as many market players opted to remain on the sidelines ahead of the monetary policy meeting of the US Federal Reserve.”

Reuters reported a 1.5% drop in US new home sales in March, against expectations of higher purchases for the month.

Investors will likely hold a wait-and-see stance for the coming days as they await the Fed’s decision and data releases from key economies, another trader said.

“There were no major catalysts [yesterday]. They are churning their volumes, players were not into position-taking,” the trader said by phone, though pointing out a “good” volume of dollars traded.

Investors traded $882.5 million on Tuesday, higher than the $722.4 million seen the previous day.

The trader said that the market is looking out for the upcoming monetary policy decisions from the Bank of Japan (BoJ) and the Fed within the week, alongside the release of the US non-farm payroll data by Friday evening.

“The dollar is expected to remain relatively strong due to expectations of strong US data on durable goods orders. Exchange rate fluctuations may remain modest due to increased caution ahead of the interest rate decision of the US,” the analyst said separately.

The market is expected to stand cautious after the BoJ announces its policy stance, though the trader noting that investors will largely be taking the cue from the Fed’s decision which will be announced on Wednesday (New York time).

The peso may move within the P46.70-P46.85 range on Wednesday, according to the trader. Meanwhile, the analyst said the range could be from P46.60-P46.90. -- Melissa Luz T. Lopez