Peso rebounds as Italy vote pummels markets
THE PESO rebounded against the dollar yesterday despite upbeat US non-manufacturing data as markets eased on Italian Prime Minister Matteo Renzi’s resignation following the result of the Italian referendum, and as investors stayed on the sidelines ahead of the US Federal Reserve’s policy meeting next week.
The local unit closed at P49.59 versus the dollar on Tuesday, 10 centavos stronger than its P49.69 finish in the previous session.
The peso traded generally stronger for the day as it opened the foreign exchange market at P49.60 against the greenback. Its intraday low was logged at P49.65, while its strongest level for the day was booked at P49.58 a dollar.
Dollars traded rose to $400.8 million from the $334.4 million recorded on Friday, data from the Philippine Dealing & Exchange Corp. showed.
“The peso appreciated today, despite better-than-expected US non- manufacturing data, due to easing concerns over Prime Minister Renzi’s resignation and the results of the Italian referendum,” a trader said in an e-mail on Tuesday.
Reuters reported that data from the Institute for Supply Management ( ISM) revealed its non- manufacturing activity index climbed 2.4% to 57.2 in November, its highest level since October 2015.
Meanwhile, Mr. Renzi swore to quit from his two and a half years in office after his defeat on Sunday in a referendum on constitutional reform.
“The rebound of euro against the dollar might influence emerging market currencies. The peso’s appreciation was capped by widespread expectations of a US rate hike next week,” the trader noted.
FED HIKE
Meanwhile one trader interviewed by phone said: “We generally saw quiet trading as the market is most likely trading sideways ahead of the Fed meeting next week.”
The Fed will hold its policy meeting on Dec. 13-14. Markets have already priced in a 100% chance that the US central will raise interest rates by 25 basis points to 0.50% to 0.75% at that meeting, a year after the Fed’s last rate hike in December 2015.
For today, traders expect quiet trading for the pair as “the exchange rate might again move sideways due to lack of fresh leads domestically and abroad,” one trader noted.
One trader sees the pair moving within the P49.55 to P49.85 range while the other trader expects the peso trading between P49.45 and P49.75 against the dollar.
ASIAN CURRENCIES RISE
Most emerging Asian currencies likewise gained on Tuesday as risk sentiment improved after the euro rebounded when market participants took a view that the sell-off after Italy’s reform referendum was excessive.
Regional currencies found further short-term support from the dollar’s broad weakness although robust US economic data cemented expectations that the Fed would raise interest rates next week.
China’s yuan hit a near threeweek high as the central bank set its daily guidance rate firmer than some investors had expected, taking a weak dollar as a chance to support the battered renminbi.
South Korea’s won rose as foreign investors recently bought bonds and Seoul shares advanced more than 1%. Indonesia’s rupiah touched a 2-1/2-week high, tracking higher government bond prices.
The euro bounced from a 21-month low hit on Monday after Italian Prime Minister Matteo Renzi lost a referendum to reform the constitution. The common currency’s rebound partially pushed the dollar’s value against a six major currency index to threeweek lows.
Investors and analysts have seen the dollar’s recent rally spurred by Donald Trump’s surprise victory as overdone.
“The USD may see further pullback on position adjustment ahead of the Fed meeting next week. That will allow a breather for Asia ex-Japan currencies,” said Christopher Wong, a senior foreign exchange strategist for Maybank in Singapore.
“But I expect some weakness in Asian currencies, given fears of Trump’s trade protectionist policies.”
Wong prefers to sell Asian currencies such as the won and the Singapore dollar against the euro and the British pound, seeing “tactical” upside risks in those currencies.
WON
The won gained as foreign investors bought a combined net 524.6 billion won ($448.1 million) worth of South Korean bonds in the first five days of this month, according to preliminary data from a financial regulator.
The inflows came despite South Korea’s political scandal that appears set to bring down President Park Geun-hye.
“Some foreigners seem to keep seeing won-dominated bonds as a safe haven,” said a bond trader for a South Korean brokerage in Seoul.
RUPIAH
The rupiah advanced 0.5% to 13,365 per dollar, its strongest since Nov. 17.
Most Indonesian government bond prices rose with the 10-year yield at a two-week low of 8.036%. •