THE PESO ended stronger against dollar yesterday following weaker-than-expected US data on retail sales, which fanned expectations of another policy rate cut by the US Federal Reserve.

The local unit closed at P51.42 against the greenback on Thursday, stronger by 17 centavos from P51.595-per-dollar close last Wednesday.

Dollars traded yesterday climbed to $1.29 billion from $1.16 billion the previous day.

Two traders interviewed said the peso’s strength can be attributed to the decline in US retail sales that “heightened expectations” of another rate cut by the Fed.

“The peso strengthened as the release of weaker-than-expected US retail sales report heightened expectations of another US policy rate cut from the Federal Reserve meeting this month,” the trader said in an e-mail.

US retail sales slumped to 0.3% in September as households cut back spending on motor vehicles, building materials, hobbies and online purchases. This was the first drop since February. Data for August was revised up to show retail sales rising 0.6% instead of 0.4% as previously reported.

“It might have increased the chances of more stimulus in the coming months so the market is already pricing in maybe one to two more cuts this coming month or at the end of the year,” the second trader said by phone.

Back home, the second trader said local developments such as the August remittances data and the cut in the reserve requirement rate (RRR) for bonds issued by banks were all “good news.”

“All news recently is pointing toward peso-strengthening bias…so it’s just a matter of time,” the second trader said.

For today, the peso is expected to rise further on likely weak US data.

“The local currency might continue to appreciate ahead of likely weaker US housing and industrial production data overnight,” the first trader added.

The first trader sees the peso settling between P51.25 and P51.45 today. — BML with Reuters

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