Peso weakens on Fed
THE PESO weakened anew yesterday to return to the P51 level as hawkish statements from the United States Federal Reserve boosted the dollar.
The local unit closed at P51.08 against the greenback, dropping 9.5 centavos from the P50.985 finish tallied on Wednesday. This is the peso’s weakest showing since Monday’s P51.10 rate.
The peso opened weaker at P51.15 and touched P51.20 as its worst showing during the session. It logged P51 as its best point during trading before settling a few centavos weaker at the session’s close.
Two traders interviewed yesterday said the downward move of the peso was largely due to fresh statements from the Fed.
“The peso depreciated today following the Fed’s decision to start unwinding its massive stimulus and its affirmation of another US rate hike this year,” one trader said on Thursday, but noted that profit taking tempered the weakness of the currency.
The Fed kept key interest rates unchanged during their Sept. 19-20 review, but bared plans of unwinding its $4.2-trillion portfolio of Treasury bonds and mortgagebacked securities starting October, Reuters reported. Fed chair Janet L. Yellen, however, signalled that a December rate hike is still being considered by the policy makers.
The bellwether Philippine Stock Exchange index picked up by 0.82% to hit 8,286.86 yesterday, hovering close to the fresh record highs logged earlier this week.
Another trader said the Fed’s pronouncements stood as a “crucial” factor during yesterday’s trading, but noted that market optimism helped clip the peso depreciation after the tax reform bill moved forward in Senate.
“[M]arket watchers have also factored in the advancing bill on tax reform. Note that the Senate version came out already and is ready for further discussions with the Lower House. I expect the peso, including the stock market, to react positively to the eventual passage of this landmark bill,” the second analyst added.
The Senate Committee on Ways and Means approved the first tranche of the tax reform bill on Wednesday, which will be soon taken up at the plenary ahead of its target implementation by 2018.
Dollars traded yesterday totalled $ 563.8 million, slightly lower than the $655 million that exchanged hands on Wednesday.
For today, the first trader sees the local currency to trade within P50.90 to P51.20, while the second one expects the peso to move within the P51- P51.50 range.