Peso flat, euro jumps as French worries abate
THE PESO slightly weakened against the dollar on Monday, joining most major non-euro currency pairs that were trading flat as the euro surged after the first round of France’s presidential election turned out bang in line with opinion polls.
Measures of expected volatility of the euro — driven to their highest in a year by nerves ahead of the vote — collapsed back to relatively normal levels around 8.5%, pointing to a fall in concern over anti-EU, anti-euro nationalist Marine Le Pen’s chances next month.
The euro itself rose by as much as 2% after the initial indications from voting gave victory to centrist frontrunner Emmanuel Macron, as predicted by weeks of polling.
The same polls show Mr. Macron defeating Ms. Le Pen by around 30 percentage points in two weeks time and that will allow players who have hedged — or dumped — their holdings of euro zone assets to buy back in.
But with the single currency easing back to just a 1% gain in Asian and early European deals, there was uncertainty about whether it would rise further with the arrival of US fund investors later in the day.
“If you are a Japanese former holder of French sovereign debt, you probably can’t just buy it all back straight away, it may be people will wait until the second round,” said Richard Benson, cohead of portfolio investment with currency fund Millennium Global in London.
The peso settled at P49.785 to the dollar yesterday, barely changed from the P49.76- to- adollar exchange rate on Friday.
Two local currency traders said the sideways movement of the peso versus the dollar showed a wait- and- see stance taken by investors ahead of offshore developments unfolding later this week.
The local currency is broadly seen consolidating for now.
“The peso depreciated slightly today, as investors were likely more cautious ahead of multiple important events this week including the interest rate decisions of the ECB ( European Central Bank) and the BoJ (Bank of Japan) as well as the release of the first quarter growth data of the US and US President Trump’s tax reform proposal,” one trader said in an e-mail interview, noting that news on the French presidential election influenced yesterday’s trading.
Another trader said investors are possibly still waiting for leads that would drive currency trading, adding that the announcement of President Donald J. Trump’s more detailed tax plans “should be big news” for pesodollar trading.
Mr. Trump has repeatedly said that he will put in place a fiscal stimulus coupled with tax cuts for middle-class earners to help stoke the US economy.
Dollars traded reached $407 million, slightly higher than the $ 384.6 million that changed hands last Friday but still seen as within the average trading volume.
At today’s trading session, investors are expected to bet on the dollar.
“The peso might still depreciate, as investors might favor the safer greenback ahead of various critical events ahead,” one trader said. —