Peso strengthens on positive sentiment
THE PESO started the week stronger versus the greenback yesterday, riding on the strength its regional peers driven by Indonesia’s credit outlook upgrade, and after the dollar slumped against a basket of currencies amid heightened political noise in the US.
The local currency finished at P49.77 against the dollar on Monday, gaining 10 centavos from its P49.87-per-dollar finish on Friday.
The peso was traded stronger against the greenback for the day after it opened at its peak of P49.70 versus the dollar, while its intraday low was just at P49.78 versus the greenback.
Dollars traded went down to $429.1 million on Monday from the $473.8 million that changed hands in the previous session.
Two traders attributed the local currency’s gain against the dollar to positive market sentiment in Asian markets on the back of an upgrade of Indonesia’s credit rating.
“We saw a definitely strong close on the peso due to Indonesia’s credit rating upgrade, and also there’s demand for the dollar, that’s why the local currency went to as low as P49.78,” the trader said in a phone interview yesterday.
“The peso traded stronger due to several factors, particularly Indonesia’s investment grade, which dragged the peso to strengthen and we saw the dollar weaken against major currencies namely the euro and sterling due to political uncertainties in the US,” the other trader said.
Global debt watcher S& P Global Ratings upgraded Indonesia’s sovereign credit score to “BBB-“or the minimum investment grade over the weekend.
Meanwhile, another trader said on Monday: “The peso appreciated today as the dollar lost some of its appeal due to political concerns involving US President Donald [J.] Trump and former FBI ( Federal Bureau of Investigation) Director James Comey. Investors fear that this political tension could delay the implementation of the Trump administration’s fiscal reforms.”
For Tuesday, one trader said the peso may play within P49.65 to P49.80 against the dollar while the two other traders see the pair ranging between P49.65 and P49.85.
ASIAN UNITS UP
Most Asian currencies edged higher on Monday, supported by a slight return in risk appetite though investors remained wary of the ongoing political turmoil in Washington.
Asian investors were assessing renewed tensions in the Korean peninsula after North Korea fired a ballistic missile into waters off its east coast on Sunday, but most were taking the North’s second missile test in a week in their stride. The South Korean won, traditionally sensitive to North Korea’s antics, rose nearly 1% against the dollar, which hovered near six-month lows.
“This week’s initial momentum seems to be risk-on, that is going to be supportive of Asian currencies,” said Vishnu Varathan, a senior economist at Mizuho Bank.
“While investors are quite wary of a lot of risks out there, they seem to be looking past them. This is also turning out to be slightly positive for equity market sentiments, which seem to be coming out of the safe-haven mode.”
Asian stocks excluding Japan posted their biggest intra- day gain in close to a month.
Markets may seek consolation from the Federal Open Market Committee minutes due on Wednesday, which may potentially slightly lift US Treasury yields, Varathan added.
US Treasury yields fell to near one-month lows on Friday as investors worried that allegations against Mr. Trump would disrupt his plans to cut taxes and increase spending.
The Singapore dollar and Thai baht, fell about 0.2% and 0.3%, respectively, tracking weakness in the Japanese yen, which was about 0.2% lower.
A Reuters poll showed Singapore’s consumer price index in April probably rose 0.7% from a year earlier, unchanged from the previous month’s pace. The inflation numbers are due on Tuesday.
The CPI numbers, however, are not likely to shift the central bank’s neutral policy stance.
The Taiwan dollar rose to its highest in nearly three weeks, up 0.6% against the dollar to 30.019, on the back of continued foreign fund flows.
The Taiwan dollar has risen about 7.5% so far this year, the second biggest gainer in the region after the Korean won, which has added 8.1%.
In March, Taiwan’s central bank had refrained from intervention to weaken the Taiwan dollar, fearful of being labelled a currency manipulator by Mr. Trump.