THE PESO recovered yesterday to a near two-week high as investors grew optimistic following the better-than-expected outcome of President Rodrigo R. Duterte’s latest State of the Nation Address (SONA), coupled with profit taking ahead of the monetary policy decision in the United States.
The peso rebounded to P50.54 versus the dollar on Tuesday, climbing 19.5 centavos from its P50.735 close the previous day. This is the local unit’s best showing since a P50.53-per-dollar finish last July 13.
The local currency opened weaker at P50.80 and even sank to as low as P50.84-to-a-dollar during the session before closing at its strongest showing during yesterday’s trading.
One trader attributed the peso’s recovery to the outcome of Mr. Duterte’s second SONA, saying the President’s two-hour speech turned out better than expected.
“There were a lot of people who had negative views ahead of the SONA, but when it came out better than expectations, they squared off their positions,” the trader said by phone.
In particular, the trader cited Mr. Duterte’s prodding for senators to approve the first tax package “in full”, which could have supported a more optimistic view among investors.
Another trader said the peso’s “drastic” rebound came as market players grew opportunistic.
“When the market broke P50.70, we saw a lot of long dollar positions unwind, causing a steep drop in the exchange rate,” the second trader said, adding that there was also a lot of offshore selling yesterday.
Dollars traded yesterday surged to $738.75 million from the $284.9 million which exchanged hands on Monday. The first trader said the bigger volume was likely due to the central bank’s intervention on the exchange rate, but the second trader said otherwise.
“That was all market, as they were taking profit ahead of the Federal Reserve’s decision tomorrow night. They are closing their positions and stopping losses once the support broke,” the trader noted.
Both analysts added that market players are looking out for the Fed’s monetary policy decision during their two-day review this week, following a 25-basis-point rate increase announced in June.
For today, the first trader expects the peso to trade between P50.50 to P50.70, while the second sees a P50.40-P50.60 range.
Most Asian currencies treaded water on Tuesday as the dollar recovered mildly from a 13-month low, while investors refrained from taking big bets ahead of the Fed’s two-day policy meeting starting later in the day. — Melissa Luz T. Lopez with Reuters