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Peso to climb on pent-up flows

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THE PESO is seen to strengthen this week amid temporary tightness in liquidity as well as pent-up inflows following the long weekend.

Last Friday, the peso ended the week at P52.86 versus the greenback, recovering from its P53.10-per-dollar finish the previous day, as banks built up their peso holdings ahead of the four-day holiday break. Week on week, the peso strengthened a tad from its P52.88 finish on Dec. 14.

A foreign exchange trader said the peso may rise due to inflows collected during the four-day break.

“The last time we had this length of a weekend, flows were thrice the size than the usual weekend. I think with the inflows, it will gap up [the peso],” the trader said in a phone interview last Friday.

Meanwhile, the other trader is expecting continued “tightness in peso liquidity” from last week.

“Dollar is still stronger offshore, but onshore, there is the pressure for banks to sell their dollars for now because it will be expensive for them to hold a long dollar-peso position at this point.”




The second trader added that the movement of the peso will be dependent on political and economic developments offshore since “it seems like the moves recently were headline-driven.”

Reuters reported that US stocks fell on Monday amid concerns of a global economic slowdown, the potential US government shutdown as well as reports that US President Donald J. Trump had discussed firing Federal Reserve Chair Jerome Powell for increasing interest rates.

Meanwhile, the dollar fell to four-month lows against the yen on Tuesday as investors cut exposure to riskier assets as Washington struggled with a partial government shutdown and open confrontation between the White House and the central bank.

For this week, the first trader expects the peso to trade between P52.60 and P52.80 versus the dollar, while the other gave a wider range of P52.60-P53.20. — K.A.N. Vidal with Reuters