Peso weakens ahead of Fed meet
THE PESO weakened against the dollar yesterday ahead of the monetary policy meeting of the US central bank.
The local currency ended Monday’s session at P52.10 versus the greenback, 17 centavos weaker than its P51.93 finish the previous day.
The peso opened the session slightly stronger at P51.92 against the US currency, which was also its best showing for the day. Its intraday low, meanwhile, was at its P52.10-per-dollar yesterday.
Dollars traded plunged to $480.3 million yesterday from the $835.6 million that changed hands in the previous session.
“It moved weaker [yesterday.] We opened flat, but we steadily moved higher throughout the day. We moved just in line with broad dollar strength,” a trader said in a phone interview on Monday.
“Since we saw thin volume, that means the market remains cautious because we have a lot of data coming in this week,” the trader added, citing the monetary policy meeting of US Federal Reserve as well as the Bank of England.
The Fed is seen to hike interest rates during its two-day meeting this week, which would be the first rate increase by the US central bank this year.
Markets are also watching out for statements on the Fed’s policy direction to assess if the monetary authority will stick to its forecast of three rate hikes this year or raise it to four.
Most central bankers said in previous speeches that they are expecting at least three rate hikes this year.
The March meeting of the Federal Open Market Committee will be the first for Fed Chair Jerome H. Powell after he replaced Janet L. Yellen last month.
Meanwhile, market players are also waiting for the monetary policy meeting of the Bangko Sentral ng Pilipinas on Thursday. Economists are expecting the monetary authority to keep its policy steady.
Another trader attributed the peso weakness as banks went “bargain-hunting for the dollar from lower rates.”
For today, traders see the peso moving between P52 and P52.20.
Most Asian currencies also softened versus the dollar on Monday, marking a slow start to a potentially tense week amid caution ahead of a key US Federal Reserve meeting.
Markets are bracing for Mr. Powell’s first monetary policy meeting on Tuesday and a widely expected 25 basis point rate hike. The key focus is, however on whether policy makers forecast four rate hikes this year, instead of the three projected earlier.
“Consensus suggests the hurdle is high for the Fed to shift to four dots, but markets are on guard and with good reason,” said Stephen Innes, head of trading, Asia Pacific, Oanda. “While a March rate hike is a foregone conclusion, many Fed policy makers have upgraded their growth outlook for 2018.” — K.A.N. Vidal with Reuters
