Peso strengthens on weak key US data

THE PESO gained strength versus the dollar yesterday on the back of weak economic data in the United States, with the sideways move reflecting market caution ahead of President Donald J. Trump’s speech before the United Nations.

The local unit ended at P51.10 on Monday, slightly appreciating from the P51.165-per-dollar finish on Friday. The peso opened barely changed at P51.17 against the greenback. It touched P51.26 as its intraday low before settling at the closing rate, which was also its best showing during the session.

Two traders attributed the recovery of the peso mainly to paling sentiment towards the dollar ahead of key developments offshore.

“The peso closed surprisingly stronger [ yesterday]. This may be because US retail sales was weaker than expected, which eventually weakened the dollar on Friday night,” one trader said.

US retail sales unexpectedly fell in August and industrial output recorded its biggest drop since 2009 as Hurricane Harvey disrupted activity, suggesting the storm could set back economic growth in the third quarter.

Another trader said the peso simply moved within its recent range as market players adopt a wait- and- see stance ahead of major events scheduled this week.

“They’re just watching out for Trump’s speech before the UN ( United Nations). Right now, the expectation is it won’t be diplomatic so some are taking positions,” the second trader said, referring to the US President’s maiden address before the 193-member group, which is likely to touch on recent geopolitical unrest with North Korea.

The trader noted that market players are likewise holding out for the upcoming meeting of the US Federal Reserve as they await the central bank’s decision on interest rates: “The Fed’s decision will depend on the impact of hurricanes Irma and Harvey. If the effect is negative, the Fed might not raise rates and that will weaken the dollar.”

The Federal Open Market Committee with hold a ratesetting meeting on Sept. 19- 20, with players waiting for cues on the timing of the Fed’s unwinding of their bond portfolio as well as whether a December hike remains on the table.

Dollars traded yesterday totalled $502.9 million, down from the $638.6 million that exchanged hands on Friday. Both traders said the amount was roughly average, although bigger flows seen during the afternoon supported the peso.

For today, the first trader expects the peso to trade between P51 to P51.20 against the greenback, while the other trader sees a P51.05- P51.25 range. Tuesday could see light trading ahead of the Fed meeting later this week. •