THE PESO strengthened on Tuesday as the market anticipates a dovish US central bank amid risks to the global economy.
The local unit ended at P50.695 to a dollar on Tuesday, appreciating by 8.50 centavos from its P50.78-per-dollar close on Monday.
The peso opened the session at P50.75 versus the greenback. Its weakest showing for the day was at P50.75 per dollar, while its intraday best was at P50.665.
Dollars traded went up to $662.50 million from $581.40 million on Monday.
A trader said the peso rose on expectations of a dovish stance from the US Federal Reserve.
“The peso appreciated today in anticipation of possible dovish comments from [US] Federal Reserve Chairman Jerome Powell in his semi-annual testimony to the US House of Representatives concerning the Fed’s monetary policy,” the trader said in an e-mail on Tuesday.
Reuters reported that Mr. Powell is likely to be fairly upbeat on the US economic growth outlook when he testifies to Congress this week.
With risks like trade policy uncertainty receding, Mr. Powell has said that he sees no reason to adjust interest rates unless there is a “material” change to the current outlook.
Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion attributed the peso’s appreciation to local trade data released on Tuesday and with markets downplaying the virus scare on Tuesday.
“The peso seems to be discounting the virus scare. Positive trade data may have also helped the peso’s strength,” Mr. Asuncion said in a text message.
Data from the Philippine Statistics Authority (PSA) showed the country’s trade deficit slimmed to its lowest level in six months in December on the back of a surge in exports.
The trade deficit in December was at $2.48 billion, the lowest since June 2019 and narrower compared to the $4.2 billion seen in December 2018. PSA data showed that exports climbed 21.4% while imports shrank 7.6% from the year ago comparable period.
Meanwhile, emerging Asian currencies strengthened on Tuesday, as a drop in new coronavirus cases and hopes for more stimulus by Beijing to prop up a virus-stricken economy improved risk appetite.
Chinese policy makers have implemented a raft of measures, including liquidity injections and import tariff exemptions for materials used for epidemic control, to support an economy jolted by the virus outbreak.
For today, the trader sees the peso moving around the P50.60 to P50.80 range, while Mr. Asuncion gave a forecast band of P50.50-P50.80. — LWTN with Reuters