Peso strengthens further ahead of Fed
THE PESO extended its gains against the dollar yesterday on the back of market jitters triggered by US President Donald J. Trump’s protectionist stance and after the Bank of Japan kept policy rates unchanged.
The peso ended at P49.77 versus the greenback on Tuesday, five centavos stronger than its P49.82 finish on Monday.
The local unit was traded stronger against the dollar for the day after it opened the session at its finish of P49.77, while its worst showing was just at P49.78- to- a- dollar. Its peak for the day was at P49.73 versus the greenback.
Dollars traded on Tuesday climbed to $ 408 million from the $246.2 million that changed hands the previous session.
Traders attributed negative market sentiment to the US President’s tight stance on immigrants.
“The peso appreciated today despite upbeat US reports overnight primarily due to concerns over President Trump’s protectionist approach to immigration and trade,” a trader said in an email on Tuesday.
On a similar note, another trader said in a phone interview: “We saw broad dollar weakness which caused market’s reaction to the drastic policies that Donald Trump has implemented over the past few days.”
Mr. Trump signed over the weekend an executive memorandum that amended US refugee and immigration policies, which called for a halt to immigrants coming from countries said to have “terrorists,” particularly Syria, Iraq, Iran, Libya, Yemen, Somalia, and Sudan, from entering the US for a period of 90 days. The seven- page document also noted the complete suspension of the entry of Syrian refugees into the US for an indefinite period.
“The peso also followed the yen, which strengthened because of the Bank of Japan’s (BoJ) decision to keep monetary policy steady,” the trader said.
The Bank of Japan kept monetary policy steady on Tuesday and roughly maintained its upbeat price forecasts, signalling a steady economic recovery will help accelerate inflation towards its 2% target without additional stimulus. In a widely expected move, the BoJ maintained the 0.1% interest it charges on a portion of the excess reserves that financial institutions park with the central bank.
“Exchange rate movements were minimal due to caution ahead of the US interest rate decision later this week,” the trader added, referring to the US Federal Reserve’s two-day policy meeting slated to end later today.
For today, traders said the peso may fall within P49.70- P49.90 against the dollar.
One trader said markets will be trading cautiously ahead of the conclusion of the Fed meeting.
The other trader said: “The peso might depreciate due to expectations of weaker Chinese manufacturing and non- manufacturing reports. The peso’s depreciation might be partly offset by reduced dollar appeal amid policy concerns in the US.”