Peso rebounds against dollar as BSP intervenes

THE PESO rebounded against the US dollar on Thursday, as the central bank intervened to limit dollar strength as markets remained bullish on US monetary policy tightening before the year ends.

The local currency closed at P51.75 against the greenback, gaining 2 centavos from the P51.77 per dollar finish on Wednesday — which was its lowest in over 11 years.

It opened at P51.75 before peaking at P51.68. Its intraday high on the other hand stood at P51.77.

Volume of dollars traded were valued at $ 650 million, down from the $773 million.

Traders said there was still dollar demand extending from the previous session’s surge as investors are positive over a Federal Reserve rate hike by December — before the Bangko Sentral ng Pilipinas (BSP) was said to intervene.

“It was difficult to break resistance because the BSP was there all afternoon to intervene. But the market is bullish, the dollar strengthened across the board, across the region,” a trader said in a phone interview yesterday.

This was because investors are pricing in a hawkish Fed chief to be appointed by Nov. 3. Reuters reported President Donald J. Trump was considering either Stanford University economist John Taylor or current Fed Governor Jerome Powell for the top post.

“There’s the likely Fed rate hike on December. Normally, when it hikes, traders usually take profits. But until that happens, they will buy and buy. They are testing the resistance,” he added.

Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines meanwhile said in an e-mail that some traders have already started to take profits ahead of the European Central Bank (ECB) policy meeting and the US third quarter economic growth report.

In its “Daily Breakfast Spread” report, DBS Bank said “markets are nearly unanimous in their expectations” of a quantitative easing tapering exercise in its policy meeting later that day.

Mr. Dumalagan said that the local pair will trade at an even higher range, between P51.45 and P51.85 per dollar.

“The peso might appreciate due to expectations of more hawkish moves from the ECB and bets of weaker third-quarter US GDP ( gross domestic product) growth,” he said.

The trader on the other hand expects a P51.60 to P51.80 range versus the greenback for today’s session.