Peso edges up as Fed hikes rates

THE PESO continued to move sideways against the dollar on Thursday as positive developments on the Philippine tax reform package tempered effects of the US Federal Reserve’s interest rate hike.

The local unit closed the session at P50.47 yesterday, inching up from its P50.48-per-dollar finish on Wednesday.

The peso opened stronger at P50.37, while its intraday high was registered at P50.35 a dollar. Its worst showing was P50.48 versus the greenback.

Dollars traded went down to $475.7 million from the $576.95 million that traded hands in the previous session.

A trader attributed the sideways movement of the peso to the result of the Fed’s two-day policy meeting.

“Today, we traded [ higher] on the back of FOMC (Federal Open Market Committee) meeting last night,” the trader said on Thursday.

The trader noted that some were buying on dips in the afternoon session.

On Wednesday, the Fed raised key short-term rates by a quarter of a percentage point, as expected, and projected three more hikes in both 2018 and 2019, unchanged from the last round of forecasts in September.

That disappointed some investors, who had expected the Fed to raise its interest rate outlook next year, given robust economic growth and lower unemployment levels in the United States.

Meanwhile, Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, attributed the generally upbeat peso performance to the ratification of the first package of tax reform bill.

“The Fed rate hike has already priced in, so somehow, the impact of the [tax reform package] becoming a law affected the market more,” Mr. Asuncion said over the phone in Filipino.

“Generally, market players have upward sentiments on the TRAIN ( Tax Reform for Acceleration and Inclusion bill), so it’s something good for the value of the peso,” he added.

On Wednesday night, the Senate and House of Representatives ratified the bicameral committee report on the tax reform package. The bill is now waiting for the approval of President Rodrigo R. Duterte. Once signed, it will be implemented by Jan. 1.

For today, a trader said the peso will move between P50.40 and P50.60, while Mr. Asuncion gave a wider range of P50.50 to P50.80.

Asian currencies rose against the dollar on Thursday, as a guarded outlook from the Federal Reserve on the economy weighed on the greenback following its widely anticipated interest rate rise.

The dollar index, which tracks the greenback against a basket of six major currencies, was down 0.06% at 93.370, after dipping 0.7% on Wednesday.