Peso slumps to fresh low as marts eye Fed, Trump
THE PESO weakened anew against the dollar yesterday to hit its lowest level in nearly eight years, as traders are on a wait-and-see mode as to how US President-elect Donald Trump will execute his policies and with markets pricing in a Federal Reserve rate hike next month.
The peso ended at P49.35 against the greenback on Wednesday, 18 centavos weaker from its previous finish of P49.17 per dollar.
Yesterday’s finish was an almost eight-year trough as it was the peso’s weakest close since it ended at P49.37 versus the greenback on Dec. 4, 2008. It is also the local unit’s new low for 2016.
The peso opened the foreign exchange market at P49.15 against the foreign unit, while its low for the day logged at P49.36. Its strongest intraday level was at P49.10 per dollar.
Dollars traded increased to $666.5 million from $600.9 million during the previous session, data from the Philippine Dealing & Exchange Corp. showed.
Traders attributed the peso’s weak performance to the market’s expectation of the Fed raising rates in December.
“The peso initially appreciated in the morning session due to profit taking, but erased its gains towards end of the day amid to increased bets of a US interest rate hike in December,” a trader said yesterday.
“Reports show that the likelihood of an interest rate increase next month surged to above 90% based on fed fund futures,” the trader added.
The trader was referring to CME Group’s FedWatch program that revealed about a 91% chance of the US central bank deciding to hike rates in its policy meeting in December by 0.50% to 0.75%
“Safe-haven buying amid political and economic uncertainties in the US also kept the peso weak against the dollar,” the trader further said.
JITTERS
Meanwhile another trader said: “Overall I think traders are jittery on what’s happening to the market,” citing the new US President’s policies and Fed rate hike decision by yearend.
“Corporates are on the waitand-see position, they’re seeing what are the policies and platforms of Mr. Trump, but with all those mentioned already, we have to see the actual execution of his policies,” the trader added.
Mr. Trump had said during his acceptance speech last week that he plans on boosting infrastructure spending for the growth of the US economy, which will entail higher inflation outlook for the country — which in turn, will support the Fed’s policy decision to raise rates next month.
Meanwhile, the trader speculated that the Bangko Sentral ng Pilipinas stepped in when the peso hit P49.30 during the day. The central bank sometimes intervenes in the currency trading to temper any sharp movements in the peso.
For today, one trader sees the peso trading within the P49.00 to P49.40 range while the other trader said the pair might move between P49.00 and P49.50 for the whole week.
One trader said that ,“higherthanexpected Philippine GDP ( gross domestic product) growth might cause the peso to appreciate.”
The Philippine Statistics Authority will report official GDP data today.