Peso slips as market awaits key US data

THE PESO moved sideways yesterday, slipping slightly, as the dollar fetched some gains as sentiment recovered following geopolitical tensions between United States and North Korea.

The local currency closed at P51.13 versus the greenback, down two centavos from Tuesday’s P51.11-per-dollar finish.

The peso opened weaker at P51.14 and hit an intraday low of P51.24 against the dollar. It touched the previous day’s level as its best showing during the session before settling at the closing rate.

Analysts attributed the peso’s slight depreciation to geopolitical concerns offshore, with the currency merely moving sideways as it reacted to dollar movements.

“Most of the movements were dictated by overall movements by the dollar,” one trader said in a phone interview. “The dollar extended a bit on its gains last Tuesday, but it was not meaningful. Easing tensions probably capped the topside to dollar-peso trading.”

Dollars traded on Wednesday reached $567.45 million, slightly higher than the $548.9 million that exchanged hands the previous day, although at a level that’s slightly below average, the trader said.

Another observer pointed out that market players may be on a wait-and-see mode ahead of key economic data in the US, which could shed some light on the next moves of the Federal Reserve.

“Geopolitical risks in the region, Hurricane Harvey’s impact in the US and US labor data are this week’s market fixation,” ING Bank N.V. Manila senior economist Jose Mario I. Cuyegkeng said in a separate market commentary, as he pointed out that investors have shifted to risk aversion following North Korea’s missile launch towards Japan on Tuesday.

“Market caution would likely remain for most of this week until clearer actions and responses from the US come to fore,” the bank economist said.

Reuters reported that investor concerns over Pyongyang’s decision to launch a ballistic missile towards Japan have begun to recede, which comes after US President Donald J. Trump issued what appeared to be a more diplomatic statement which helped ease tensions.

Mr. Trump said “all options are on the table” in dealing with North Korea’s actions, which was more measured than his previous call of responding with “fire and fury” amid threats to fire Guam, a US territory.

Due this week are data on labor, manufacturing, construction spending, and car sales — all of which may bare hints as to whether the US economy is sustaining its recovery in line with the Fed’s expectations.

For today, the trader expects the peso to trade between P5151.25, amid expectations that the local unit will simply track the dollar. Meanwhile, Mr. Cuyegkeng sees a P50.95-51.30 range.

ASIAN CURRENCIES RISE

Most emerging Asian currencies rose on Wednesday, with the Chinese yuan hitting its highest level in over a year, as investors’ concerns over North Korea’s latest missile launch eased.

North Korea’s launch on Tuesday of a ballistic missile over northern Japan initially spooked investors and triggered a slide in the dollar, but North Korean media reports lacked the usual claims of technical advances, suggesting the test may not have gone as planned.

China’s yuan rose to its highest since June 23, 2016, and was headed for a fourth straight session of gains after the central bank set sharply firmer guidance and following stronger institutional and corporate dollar sales.

Prior to market opening on Wednesday, the People’s Bank of China raised its official yuan midpoint to 6.6102 per dollar, the strongest since Aug. 17, 2016.

The South Korean won was quoted at 1,122 as of 0509 GMT, up 0.4% compared to Tuesday’s close of 1,126.4. Meanwhile, Malaysia’s ringgit and the Indian rupee inched down.

“First, risk sentiment is better due to lowered tensions with North Korea. ‘All options are on the table’ sounds less threatening than ‘fire and fury’, said Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken.

“Second, the Chinese yuan’s strength is dragging Asian FX (foreign exchange) stronger. The central bank seems okay with a stronger currency.”

Currency traders are now looking to US non-farm payrolls data for August, due on Friday, following data that showed US consumer confidence surged to a five-month high in August as the labor market improved and house prices rose. —