Peso back at P50:$1 level on Federal Reserve hawk’s departure, Canada hike
THE PESO strengthened anew yesterday to log its best showing in a month as the resignation of a Federal Reserve official and a surprise rate hike in Canada dampened sentiment towards the dollar.
The local currency closed at P50.93 versus the greenback, up 16.5 centavos from Wednesday’s P51.095 finish. This is also the peso’s strongest rate since a P50.795-per-dollar rate logged on Aug. 10, marking a fifth straight day of a rally.
The currency traded generally stronger during the session as it opened at P51. It touched P51.10 as its intraday peak, before settling at the closing rate which was also its best showing during the day.
Two traders interviewed yesterday attributed the peso’s strength to a generally weaker dollar due to developments offshore, particularly in the United States.
In particular, they referred to the announcement of Fed ViceChair Stanley Fischer of an early resignation that takes effect mid- October, which was taken by market players as one less hawk in the US central bank.
“Fischer’s resignation had a huge influence,” one trader said, noting that it added to downward pressures on the greenback on the political front.
“There’s been disappointment over the way the Trump administration is performing with the tax plan and the debt ceiling. All these things are pretty much causing disappointment up until now. Until it gets its act together, we’re continuing to see dollar move lower across the board and that is helping the peso for now.”
Another trader said the dollar extended its depreciation following the Bank of Canada’s “surprise move” overnight as it opted to hike interest rates, which allowed the Canadian dollar and other currencies to strengthen.
Asian currencies rose on Thursday as investors saw the resignation of Mr. Fischer as a sign that it will be even more cautious about raising interest rates again, implying further weakening in the dollar.
“We could read into the Stanley Fischer surprise overnight, considering that he was leaning towards interest rate normalization. I think the market thinks that now the chance of interest rate normalization may get delayed further,” said Stephen Innes, senior trader at OANDA.
Among Asian currencies, the South Korean won rose to a near one-week high against the dollar after the White House said it was suspending internal discussions on terminating the US trade agreement with South Korea.
A Bloomberg survey among Philippine traders and foreign exchange executives showed that any future rate hikes in the US would be the “biggest macro issue” to affect the peso’s performance, as well as economic growth.
Dollars traded yesterday reached $ 613.8 million, rising from the $ 468.8 million which exchanged hands previously.
All eyes are now on the European Central Bank (ECB) as they anticipate its latest monetary policy decision at its meeting set later on Thursday.
Both traders expect the peso to trade between P50.75-P51 on Friday, with the second trader noting that any hints from ECB President Mario Draghi on rate normalization could affect the exchange rate. •