Peso slips as market eyes Fed meet

MANILA/SINGAPORE — The peso slipped anew to close weaker against the dollar yesterday as profit taking and month-end demand for the greenback continued to drag on the local unit and as investors remained on the sidelines as the US Federal Reserve began its two-day policy meeting.

The local unit lost six centavos against the greenback yesterday, closing at P44.32 per dollar from its Tuesday finish of P44.26 versus the foreign currency.

The peso traded “sideways” most of the day, a trader interviewed by phone said, opening stronger at P44.20 against the greenback, which was also its best intraday level.

It however succumbed to the dollar’s strength, giving up its early gains to close yesterday’s session at its weakest intraday level of P44.32 to the dollar.

Trading volume also fell to $314.35 million from the previous session’s $379.9 million.

A trader said the market’s “month- end requirement” for the greenback and “market consolidation ahead of the shortened week” weighed on the peso.

“Could still be due to profit taking ahead of the FOMC (Federal Open Market Committee) meeting and the regular monthend demand for the US dollar,” the trader said.

Philippine financial markets will be closed on Friday for the Labor Day holiday.

Another trader said: “US dollar closed higher ahead of FOMC. Looks like market was shortsqueezed due to relatively thin volume.”

“Market opened at P44.20 on reaction to weak USD overnight but the pair still failed to break the support. Also, Philippine equities dropped, another evidence that investors are trying to cover some risks ahead of the FOMC meeting results,” the trader added.

The bellwether Philippine Stock Exchange index fell by as much as 98 points yesterday before trimming its losses to close at 7,825.47 — down by 61.10 points or 0.77% from Tuesday’s finish.

MetisEtrade, Inc. senior analyst Yroen Guaya Melgar, for her part, said in an e-mail yesterday: “The dollar gained slightly against the peso yesterday, despite the fall in US consumer confidence this April. The Conference Board’s consumer confidence index fell to 95.2 this month, much lower March’s 101.4 index level. This is likely prompted by softening short- term outlook due to the lackluster performance of the US manufacturing sector.”

“Although data softened in the short-term, financial confidence this month remains much higher than the 82.3 level seen in April 2014,” she added.

The dollar softened in Asia Wednesday on expectations that the Fed will delay an interest rate hike.

The greenback fell to 118.83 yen in afternoon trade from 118.88 yen in New York, while it is sharply down from the 119.10 yen earlier Tuesday in Asia.

The dollar weakened to 63.20 Indian rupees from 63.38 rupees on Tuesday, to 1,068.54 South Korean won from 1,070.86 won, to Tw$30.50 from Tw$30.53 and to Sg$1.3216 from Sg$1.3281.

The greenback also eased to 12,966.00 Indonesian rupiah from 12,991.40 rupiah while gaining marginally to 32.68 Thai baht from 32.61 baht.

Today, Ms. Melgar said increased trading volume is expected due to the release of US firstquarter gross domestic product data and the FOMC’s policy statement as it wraps up its meeting.

“The US economy is projected to have grown by 1% for the first quarter of 2015, slightly softer than the 2.4% average expansion in 2014. Due to weakness in recent data, the Fed statement is also anticipated to be more dovish, most probably hinting that a rate hike will be unlikely even in June... Dollar sell-off is possible should the data and Fed outlook be gloomier than forecasted,” she added.

The FOMC will release a statement on Wednesday in Washington ( Thursday morning in Manila) after concluding its two-day policy meeting.

The first trader said the peso could move within the P44.15- to P44.40-per-dollar band, while the other trader said the exchange rate could range between P44.20 and P44.40. MetisEtrade’s Ms. Melgar said peso- dollar rates could be between P44.19 and P44.44 today. —