Peso rebounds against US dollar ahead of Fed meeting

THE PESO rebounded against the dollar on Tuesday tracking regional peers, ahead of the US Federal Reserve policy meeting this week.

The local unit closed at P49.775 versus the dollar on Tuesday, four- anda-half centavos higher than its P49.82 finish in Monday’s session.

The peso generally traded sideways after it opened the foreign exchange market at its lowest level for the day at P49.80 against the greenback. While the local unit’s strongest level for the day was at P49.74 a dollar.

Dollars traded declined to $ 329.2 million from the $341.1 million recorded on Monday, data from the Philippine Dealing & Exchange Corp. showed.

Traders attributed the pair’s sideways trading to investors staying on the sidelines ahead of the Fed’s policymaking body Federal Open Market Committee (FOMC) two-day meeting, where markets are almost certain that the US regulator will raise interest rates by 25 basis points at 0.50% to 0.75%.

“As you can see from the volume of dollars traded, most players are just waiting for the data after the FOMC (Federal Open Market Committee) meeting,” a trader said in a phone interview.

“We saw quiet trading as the market consolidated yesterday as players prefer to wait for the FOMC decision, so most players were on the sidelines,” the trader added.

“Trading yesterday was really quiet, basically it was range-bound and we saw regional peers having light trading as well, but given the small volume of dollars traded, it was an evidence that there was very light interest in the market as everyone’s waiting for the FOMC,” another trader said in a phone interview.

The trader also mentioned that, “We did not expect any intervention [from the Bangko Sentral ng Pilipinas] as volume was very light and the rest of the region will just remain light, taking its cue form the FOMC.”

The BSP sometimes steps in the currency trading to temper any sharp movements in the peso.

“But given that markets are already sure that the Fed will raise rates this week, what everyone’s really anticipating is what will happen after the decision. What will be the Fed’s tone after they decide to rate hikes this week, how aggressive will the Fed be after they hike rates this week,” the trader noted.

Should the Fed decide to push interest rates higher this week, it will be the first tightening move since it decided to raise rates in December 2015, after keeping rates at near-zero levels following the global financial crisis in 2008.

One trader expects the peso-dollar pair to trade within the P49.70 to P49.85 range, while the other sees the peso’s strong support to be at P49.60, with its resistance at P50. —