By Melissa Luz T. Lopez, Senior Reporter
THE PESO sustained its rally on Friday to log its best showing in eight months, riding on a weaker dollar due to dovish comments from the US Federal Reserve.
The peso closed the week at P52.14 against the greenback, up 8.5 centavos from its Thursday finish of P52.225. The local unit initially traded weaker, opening the session at P52.28 versus the dollar. It even hit an intraday trough of P52.32 before ending at its best showing for the day.
This is the best showing of the peso since May 10, when it closed at P51.80 to the dollar.
Two traders interviewed by phone said the peso is tracking a regional pickup against the dollar, buoyed by risk-on sentiment among market players in favor of emerging market currencies.
“I think it’s still broad dollar weakness,” one trader said, noting that the investors are “pricing in the dovish Fed.”
Fed Chair Jerome H. Powell said on Thursday that the US central bank can afford to “be patient” on its path towards higher interest rates, adding that policy makers are not looking at a “pre-set path” for key rates for 2019.
Reuters reported that market watchers took this as another hint that the Fed may pause with its tightening cycle, following four rate increases fired off last year.
This has fueled investors to take on a “risk-on sentiment” as they search for better yields outside the US economy, another peso trader said.
“The market is skewed on the downside for the dollar, so we are seeing dollar-peso continue to move lower,” the second trader added, noting that all eyes are on the US inflation data which are due Friday night.
“The momentum is still positive for the peso,” he also said.
The peso has been appreciating versus the greenback since Tuesday, with the momentum sustained largely due to better-than-expected external trade data published by the Philippine Statistics Authority.
The country’s trade deficit narrowed to $3.9 billion in November as imports grew at a slower pace, despite a sustained exports slump. This improved from the record $4.08-billion trade gap recorded in October.