Peso slips as Fed minutes bare upbeat US outlook

THE PESO slipped against the dollar, breaking its eight-day streak, due to the upbeat outlook on the US economy in the minutes of the Federal Reserve meeting last month.

The local currency finished at P49.82 against the greenback yesterday, dropping a centavo from its P49.81- per- dollar close on Wednesday.

The peso opened the session weaker at P49.90 against the dollar, while its intraday low was seen at P49.93. Yesterday’s best showing, meanwhile, stood at P49.805 versus the greenback.

Dollars traded slid to $519.25 million from the $634.2 million that changed hands in the previous session.

“The peso slightly depreciated today, breaking its recent upward trend due to hawkish outlook on the US economy as reflected by the minutes of the December Fed meeting released [ early yesterday],” a trader said over the email on Thursday.

Most Fed officials said in the December meeting of the Federal Open Market Committee that the larger take-home pay provided by the federal tax reform will bolster consumer spending.

“Many participants expected the proposed cuts in personal taxes to provide some boost to consumer spending,” the minutes stated, adding that some officials said the expectations on the tax reform “may have already raised consumer spending.”

However, a number of Fed officials raised uncertainty about the effects of tax reform on consumer spending.

In line with this, the officials raised their 2018 economic growth projection to 2.5% from the previous 2.1%.

“Most participants indicated that prospective changes in federal tax policy were a factor that led them to boost their projections of real GDP ( gross domestic product) growth over the next couple of years.”

For Ruben Carlo O. Asuncion, Union Bank of the Philippines chief economist, the slight descent of the peso against the dollar is attributable to some profit-taking.

“I think some of the investors are already taking their profits, although it doesn’t mean that people are no longer bullish,” Mr. Asuncion said over the phone.

He added that the peso will likely continue its strength, but this might be tempered by the waning volume of remittances since the holiday season is already over.

Another trader noted that the peso, along with the other Asian currencies, were “trading quiet” yesterday.

“Actually, it’s pretty much sideways trading the entire day. All the other currencies were also relatively quiet,” the trader said over the phone.

For today, the first trader expects the peso to move between P49.70 and P49.90 against the dollar, while the second trader gave a slightly wider range of P49.70 to P50.

“The peso is expected to move sideways tomorrow amid likely slightly weaker US ADP employment data and outlook on local December inflation to come relatively near inflation levels reported last November,” the first trader said.

Most Asian currencies also slipped against the dollar on Thursday after upbeat US economic data, plus minutes from the Federal Reserve’s December policy meeting, spurred some recovery for the weak greenback.

The dollar rose on better-thanexpected US December factory data, and was further boosted after minutes of the Fed

“Today’s movement is largely driven by the dollar rebound,” Sim Moh Siong, FX strategist at Bank of Singapore, said on Thursday.

Sim said the dollar’s rebound likely is short term and it should taper because global recovery should continue to keep the currency softer.

But if US payroll numbers due on Friday are strong, “there could be a bit more dollar strengthening,” he added.

The Malaysian ringgit shed as much as 0.3% against the dollar.

The Thai baht and the Indonesian rupiah were among Thursday’s few gainers among Asian currencies. Both currencies rose about 0.2% against the dollar.

Thailand and Indonesia, which are both major commodity exporters, have seen their economies benefit from a recent uptrend in oil prices.

“Rising oil prices will be positive for commodity driven currencies,” Sim of Bank of Singapore said.

Oil prices on Thursday remained near levels last seen in late 2014/2015, with markets tightening amid tensions in Iran and due to ongoing production cuts. •