Peso drops on US data

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THE PESO went down on profit taking and following US inflation data. — BW FILE PHOTO

THE PESO declined against the dollar on Monday as investors pocketed profits following the US inflation data that came out before the weekend.

The local currency ended yesterday’s session at P52.26 versus the greenback, 12 centavos weaker than the P52.14-per-dollar finish last Friday, which was an eight-month high.

The peso opened the session weaker at P52.17 against the dollar, sliding to as low as P52.275 intraday. On the other hand, its best showing for the day stood at P52.11 versus the US currency.

Trading volume thinned to $693.89 million from the $831 million that switched hands the previous session.

A foreign exchange trader said the peso weakened yesterday in line with other currencies as the dollar recovered from the previous low.

“This move is just short-dollar profit taking… There’s nothing significant abroad,” the trader said in a phone interview. “We only had a data last Friday, the US CPI (consumer price index), which came in line with expectations.”

The US Labor Department reported that consumer prices declined 0.1% in December, its first drop in nine months, on the back of steep decline in gasoline prices amid pressures from steady increases in rental housing and healthcare costs.

“We don’t really have any near-term catalyst in the moment. The market will tend to just lock in profit and re-establish once there’s a new data coming,” the trader mentioned.

Another trader said in an e-mail that the peso weakened as “investors took advantage of the fresh eight-month high of the local currency to pile up towards the greenback.”

In the coming days, the first trader added that the momentum for the peso to strengthen is “still intact.”

ING Bank N.V.-Manila said in a report on Monday that the peso should “continue to enjoy an appreciation bias” as long as the US Federal Reserve remains dovish and investors chase yields.

Fed Chair Jerome H. Powell said on Thursday that the monetary authority can afford to “be patient” on its path towards higher interest rates, adding that policy makers are not looking at a “preset path” for key rates for this year.

“[However], we expect PHP to still slightly trail the regional gainers on corporate demand,” ING added.

For today, the first trader expects the peso to trade between P52.10 and P52.30, while the other gave a P52.15-P52.35 range.

“The peso might appreciate following the dovish hints from both Fed Chair Powell and Fed Vice-Chair Clarida, alongside with expectations of weaker US producer prices inflation,” the second trader noted. — Karl Angelo N. Vidal