Peso drops on strong US data ahead of Fed decision
THE PESO weakened anew versus the dollar on Wednesday due to upbeat US economic reports and as investors stayed on the sidelines ahead of the close of the Federal Reserve’s policy meeting.
The peso ended at P50.64 versus the dollar yesterday, dropping 10 centavos from its P50.54-perdollar close on Tuesday.
The local unit opened at P50.65 versus the foreign currency. It sank to as low as P50.73, while its intraday high was at P50.48 against the greenback.
Dollars traded yesterday surged to $932 million from the $738.75 million that exchanged hands on Tuesday.
One trader attributed the peso’s weakening versus the dollar to strong reports on US consumer confidence, adding that market players are also expecting hawkish statements from the Fed as it closes a two-day Federal Open Market Committee ( FOMC) meeting.
The US Conference Board reported its consumer confidence index surged to 121.1 in July, a 16year high, from the 117.3 reading in June on the back of the market’s bullish outlook on the labor market and after house prices kept an upward trend in May, boosting consumer spending.
Meanwhile, Reuters reported analysts are expecting the Fed to keep interest rates steady at the close of their two- day meeting, and are instead looking forward to policy makers hinting on their plans to trim its balance sheet by September.
Another trader said by phone: “We’re seeing choppy trading with not much clue as to where the next direction will be because it seems the pair is just consolidating.” The trader added that some market players adjusted their positions ahead of the FOMC as most are expecting rates to remain unchanged, noting: “Usually the Fed’s habit of tightening is that they’d do this only at quarterly meetings and that seems to be the game plan going forward.”
For today, the first trader expects the peso to trade between P50.50 and P50.80 versus the dollar, while the second sees a P50.50-P50.90 range.
The traders said trading will take its cue from the Fed meeting.