Peso returns to P49:$1 level on tax concerns
THE PESO grew stronger against the dollar on Thursday, returning to the P49 level for the first time in more than six months, as market players weigh the negative effects of the US tax overhaul on large financial institutions.
The local currency closed the session at P49.98 versus the greenback, gaining six centavos from its P50.04-per-dollar finish on Wednesday.
Yesterday’s finish was also the peso’s best performance since it closed at P49.91-to-the-dollar last June 19.
The local unit traded stronger the whole day, opening at P49.94 versus the dollar. Its intraday low stood at P50.05, while its best showing was at P49.85 against the greenback.
Dollars traded yesterday surged to $625.3 million from the $523.1 million that changed hands on Wednesday.
A trader interviewed yesterday said the peso climbed mainly on the back of rising concerns over the US tax reform law signed last week.
“The continuous strength of the peso is driven by outlook on the unprecedented impact of the US tax reform to large financial institutions, primarily due to substantial adjustments to these firms’ deferred tax assets which are seen to affect income statements negatively,” a trader said in an e-mail.
On Wednesday, Barclays said it expects a $1.3-billion write-down on its annual post-tax profits, forcing the lender to reduce its deferred tax assets value. The British bank is also expecting its common equity Tier 1 capital ratio to go down by 20 basis points.
Meanwhile, another banker suspected the Bangko Sentral ng Pilipinas of buying dollars in the afternoon trading, prompting the peso to hit its P50.05 low.
“What we noticed is some late session buying from agent banks, and this sparked a rally in the last 10 minutes before the closing,” another trader said.
Continued offshore investor interest and sustained remittance inflows even after Christmas also boosted the peso.
For today, one trader said the peso may play within P49.80 to P50.10 against the dollar, while the other trader sees the pair moving within a slightly slimmer range of P49.85 to P50.10.
Another trader gave a higher projection of P49.80 to P50.05. “It is expected that the local currency will appreciate [today] due to possible window-dressing of local traders as this year’s trading come to a close.” — Karl Angelo N. Vidal
