Peso rebounds on profit-taking
THE peso rallied on Friday amid profit taking, with the currency touching its high for the year during the session, despite upbeat economic data from the US.
The peso closed at P51.39 against the dollar, gaining against P51.43 on Thursday.
The peso opened immediately on a weaker note at P51.53, before dipping to the day’s low of P51.61. It later hit an intraday peak of P51.36.
Dollar trading volume was $1.101 billion on Friday, up from $821.1 million on Thursday.
Traders said that the peso initially weakened due to to strong US economic data, before the market decided to take profits, resulting in the peso’s late strengthening.
“The peso initially opened weaker today amid upbeat US data on producer prices and initial jobless claims, but trimmed its losses towards the end of the session due to profit-taking ahead of the US inflation report,” Land Bank of the Philippines market economist Guian Angelo S. Dumalagan in an email.
One trader noted that the Bangko Sentral ng Pilipinas (BSP) intervened to prevent the peso from breaching the year-to-date low of P51.61.
However another trader said that the currency movements were purely profit-taking, with markets doubting a strong US inflation reading later in the day.
“We didn’t see any intervention from BSP. I think it’s just profit-taking,” the second trader said, noting that the the currency tracked its Asian peers.
“The market is expecting a strong CPI (consumer price index) in the US, but that’s not certain. As seen in the Federal Open Market Committee minutes, they remain doubtful that inflation will strengthen,” he said.
“I think that played a big part, that’s why the market still sold the dollar,” added the trader.
Federal Reserve policy makers have considered the trajectory of inflation, which could lead them to deliver a third rate hike before the end of the year. However Fed Chair Janet L. Yellen has indicated that there is rising uncertainty on the path of inflation, which has been retreating from the Fed’s 2% target rate over the past few months. – Elijah Joseph C. Tubayan
