THE PESO will likely trade sideways versus the dollar in the coming days after the much-awaited speeches of central bank officials failed to shed light on next policy moves in the United States and Europe, and ahead of key economic data to be released later this week.

The local unit closed at P51.08 against the greenback on Friday, slightly weaker than the P51 finish it logged the previous day, which was its best showing in nearly two weeks.

Week on week, the peso appreciated by 41 centavos coming from the P51.49-per-dollar rate logged on Aug. 18.

Financial markets were closed on Monday for the National Heroes’ Day, a public holiday in the Philippines.

Traders interviewed late last week said they expect the exchange rate to stand little changed from Friday’s level after the heads of the US Federal Reserve and the European Central Bank (ECB) bared no hints about their next moves during their much-awaited remarks last Friday.

“The dollar might initially move sideways in the first two business days of the week amid mixed signals from the US last Friday. Policy makers gave no concrete leads regarding monetary policy during the Jackson Hole Economic Policy Symposium,” said Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines.

US Fed chair Janet L. Yellen and ECB president Mario Draghi did not drop hints on future policy moves during their public appearances in Wyoming, leaving market players with no new leads as to when the monetary authorities will next tweak rates.

Mr. Dumalagan also noted that investors will instead look for new leads as they anticipate key economic data from the US on employment, growth, and personal spending later this week.

A currency trader said separately that although market players were looking forward to Ms. Yellen and Mr. Draghi’s speeches, the currency is unlikely to see significant swings given that the initial expectation was that the two central bankers would not “veer away from their usual rhetoric.”

The trader also expects trading volumes to return to the average $500-600 million level after the previous week saw two straight days of roughly $1 billion which exchanged hands.

Analysts said the bigger amounts seen last week may have been due to inflows of foreign investments likely stemming from the acquisitions of Japan Tobacco International of the local cigarette firm Mighty Corp., as well as offers from foreign private equity funds to acquire a third of Energy Development Corp.

Some intervention from the Bangko Sentral ng Pilipinas (BSP) may have also contributed to the bigger volume.

For this week, Mr. Dumalagan said he expects the currency to trade within P50.90 to P51.40 versus the dollar this week, while the trader sees a P51-P51.25 range.

NEW STRATEGY
Traders have also noticed the BSP’s different take on exchange rate intervention under Governor Nestor A. Espenilla, Jr., as they noted that the new chief appears to be more “tolerant” of greater volatility than his predecessor.

Mr. Espenilla took office on July 3, succeeding Amando M. Tetangco, Jr. who served as BSP chief for 12 years.

“The BSP appears to be more tolerant for a weaker peso,” one trader said by phone. “The BSP is controlling the peso’s descent, but if it’s going higher it doesn’t really mind… A weaker peso is fine; it’s not so bad for BSP.”

The trader said daily foreign exchange trading has seen a “little bit more volatility” and a wider trading range under Mr. Espenilla, against an established trend under Mr. Tetangco where there was a specific “band” which the central bank maintains over a number of months.

Another trader echoed this view, noting that there was greater volatility and a perception that the BSP is relying on the market for the exchange rate to “self-correct.”

“Before, there was demand — you’ll see a certain level that BSP will try to offer, and that will cap the market,” he said separately. “In terms of presence in the market, mas mahirap basahin ngayon (it’s harder to predict), but with what he (Mr. Espenilla) is saying, he’s very clear that the currency will find its true value.”

Mr. Espenilla said the BSP allows the peso to “adjust moderately and gradually” versus the dollar, as it assured that it was in firm control of the exchange rate especially in tempering any sharp swings during trading. — Melissa Luz T. Lopez

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