THE PESO continued to strengthen against the dollar on Tuesday to hit a new high on the back of profit taking ahead of the release of some US economic data.
The local currency ended yesterday’s session at P50.90 versus the greenback, 10 centavos higher than its P51-per-dollar finish last Monday.
This was the peso’s best showing in nearly one-and-a-half years or since it closed at P50.84 against the dollar on Jan. 26, 2018.
The peso opened the session at its worst showing of P51 per dollar, while its intraday high stood at P50.88 against the US currency.
Dollars traded surged to $1.045 billion from the $744.96 million that switched hands the previous session.
“The local currency continued in its strengthening as participants took profits ahead of likely weaker US retail sales report,” a trader said in an e-mail on Tuesday.
According to a poll conducted by Reuters, retail sales in the US likely edged up by 0.1% in June. If realized, this would be slower than the 0.5% growth in May, as households bought more automobiles and other goods.
Apart from retail sales data, another trader said market participants are also awaiting June US industrial production data.
“The dollar-peso breached the support level at P51, although it was capped at P50.88 since market players most likely took profit ahead of the upcoming data,” the second trader said.
The trader added that the peso continued to strengthen yesterday as the market was still pricing in a weaker dollar due to expectation of a cut from the US Federal Reserve.
Last week, Fed chair Jerome Powell hinted on a possible cut in interest rates, saying it will “act as appropriate” to sustain expansion given the headwinds that are weighing on the economy.
“I think the dollar moving lower is overdone, so there’s some profit taking going on already,” the second trader said.
For today, the first trader expects the peso to trade between P50.75 and P50.95 against the greenback, while the other gave a P50.80-P51.10 range.
Meanwhile, other emerging Asian currencies largely held to the sidelines on Tuesday as investors were reluctant to make any big bets ahead of US retail sales and a host of speeches from Federal Reserve officials later in the global day.
Market focus is firmly on a widely-expected US Federal Reserve rate cut later this month, with traders keenly assessing data from the world’s largest economy to gauge the extent to which the Fed might be willing to ease monetary policy.
“A very cautious start for risk assets this morning with trader positioning gingerly knowing that the rest of the week is potholed by Fed speakers and critical US data releases,” Stephen Innes, managing partner at Vanguard Markets Pte Ltd said in a note.
Mr. Powell and Federal Reserve Governor Michelle Bowman will be among those making speeches later in the day.
The Fed will also release its key Beige Book on US economic conditions on Wednesday, which investors will study for insight on how trade tensions are affecting the business outlook.
Most Asian currencies had advanced in the previous session after monthly Chinese data showed signs that Beijing’s stepped-up stimulus efforts might be helping to stabilize the world’s second largest economy. — Karl Angelo N. Vidal with Reuters