Peso climbs on stimulus hopes
THE PESO closed stronger against the dollar at the start of the week as investors took trading cues from developments overseas.
The local unit closed at P46.775 versus the dollar, stronger by 14 centavos compared to its P46.915 finish against the greenback last week.
The peso opened trading at P46.85 to the dollar and dropped to as low as P46.89 against the foreign unit during intraday trade.
Its strongest point was logged at P46.70 per dollar.
Volume at the foreign exchange market was at $ 535.2 million, slightly less than the $538 million from the previous session’s $ 538.7 million seen during last Friday’s session, data from the Philippine Dealing System showed.
A trader said the peso ended higher as market players bet that central banks would soon introduce easing measures to encourage global economic growth.
“Investors were hoping that central banks, the Bank of Japan in particular, would soon loosen policies by cutting interest rates or expanding asset-buying programs which drove risk appetite and boosted emerging market currencies including the peso,” the trader said.
“Investors were also betting that the US Federal Reserve would hold off on raising interest rates at all this year, instead of doing so twice as officials had earlier projected,” the trader added.
Another trader said: “The peso appreciated due to profit taking amid easing concerns over ‘Brexit.’”
“Expectations of more easing from China and Japan also strengthened the peso by boosting investor sentiment. Betterthan-expected US manufacturing data may have limited the peso’s appreciation,” the trader added.
For today, the trader said the dollar might strengthen initially, as expectations of weak Caixin services data may trigger safehaven buying.
After which, the trader noted that the peso might resume its appreciation due to continued profit taking ahead of key US reports.
Traders said the exchange rate may move within the P46.65 to P46.95 range today.
Most emerging Asian currencies rose on Monday in subdued trading as investors continued to seek the region’s higher yields on expectations that central banks in developed countries may ease monetary policies further.
China’s yuan kept failing to ride on the trend and touched its weakest since December 2010 as a lack of signs of intervention to prop up the renminbi indicated the central bank would tolerate a further weakening of the currency.
Trading in Asia was relatively inactive ahead of the US Independence Day holiday and regional festivals to celebrate the end of the Muslim fasting month. Indonesian financial markets are already closed and will reopen on July 11.
Thailand’s baht led regional gains, hitting a two-month peak on capital inflows and catch-up demand. The local financial markets were shut on Friday when most of its regional peers rose.
“In the lead- up to ‘ Brexit’, global investors were positioned extremely defensively in Asia EM [emerging markets] and now these underweight positions are moving to overweight,” said Stephen Innes, a senior trader for foreign exchange broker Oanda Asia Pacific in Singapore.