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Peso ends 2018 stronger vs dollar but posts year-on-year plunge

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THE PESO strengthened further on Friday, paring losses in the last trading day of 2018 due to weaker economic data in the United States that kept the dollar on a losing streak.

The peso ended at P52.58 versus the greenback, 8.5 centavos stronger than its P52.665 finish on Thursday. This is the currency’s best showing since Dec. 4, where the peso stood at P52.52 to $1.

For the year, however, the peso was down sharply from its 2017 close of P49.93 versus the dollar.

The local unit appreciated throughout its last trading session for 2018, opening at P52.65 which was also its intraday low. It even touched a high of P52.52 before settling at the closing rate.

One trader interviewed by phone said the peso benefited from a weaker dollar despite “mixed sentiment” from market players who were smoothening their positions ahead of another long weekend.

“The range was quite lower versus the dollar due to weaker-than-expected US consumer data overnight,” the trader said in a phone interview.




Reuters reported that consumer confidence among Americans posted the fastest decline in three years, fueling fears that their economy may be slowing down.

The trader added that there were “aggressive” sellers ahead of the long weekend, which was matched by equally aggressive buyers of the currency in “as risk-off sentiment is expected crossing the year.”

A second currency trader echoed this view, saying that the strong buying interest drove the local unit higher during the afternoon session.

Dollars traded on Friday reached $664.4 million, lower than the $807.45 million which exchanged hands the previous day.

PARING LOSSES
The peso suffered a beating this year due to a mix of local and global factors, the traders noted, but has since recovered coming from 12-year lows back in September.

Some economists expected the peso to end as low as P53 or even P54 versus the greenback this 2018 after touching these levels back in September and October. From trading at P54.325 to $1 last Sept. 26 (or down 8.8%), the peso has since pared its losses to close the year down by roughly five percent.

“For this year, the weakening of the peso is not just the peso itself and the strengthening of the dollar across-the-board — a lot has happened worldwide,” the first trader said, pointing out that a wider trade deficit and an “uncontrolled” inflation earlier this year pulled down the peso.

The peso has since been dethroned as the worst-performing currency in the region, falling third to the Indian rupee and the Indonesian ringgit.

The second trader pointed out that the four rate hikes by the US Federal Reserve as well as the catch-up play made by the Bangko Sentral ng Pilipinas (BSP) from May to November shaped market sentiment towards the peso.

Financial markets will be closed until Jan. 1 in for the New Year’s Day festivities. Trading resumes Jan. 2, with the BSP announcing that clearing, settlement and treasury operations will be live despite a government-wide holiday. — Melissa Luz T. Lopez