Peso strengthens ahead of break amid Fed uncertainty, US growth
THE PESO gained ground versus the greenback on Monday amid sideways trading due to profit taking ahead of the holidays, stronger-than-expected US economic growth, and uncertainty ahead of a decision on the Federal Reserve’s new chief.
The local currency ended at P51.61 versus the dollar yesterday, 15 centavos stronger than Friday’s P51.76-a-dollar finish.
The peso strengthened to P51.70 against the greenback as the session opened. It dropped to a low of P51.735, while its best showing was its closing level for the day.
Dollars traded dropped to $ 421.8 million from Friday’s $629.5 million.
Traders attributed the slight uptick to profit taking ahead of the holidays.
Local financial markets will be closed today and tomorrow for All Saints’ Day.
“There was not much movement and the peso barely moved because of the anticipated holidays,” UnionBank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in an email.
The market also reacted to stronger-than-expected US gross domestic product (GDP) data released over the weekend, a trader said. The US economy unexpectedly maintained a brisk pace of growth in the third quarter as an increase in inventory investment and a smaller trade deficit offset a hurricane-related slowdown in consumer spending and a decline in construction.
Gross domestic product increased at a 3% annual rate in the July- September period, also supported by strong business spending on equipment, the US Commerce Department said on Friday. With inventories, goods yet to be sold, contributing almost three-quarters of a percentage point to growth last quarter, the increase in GDP overstates the economy’s health.
FED CHAIR DECISION
Uncertainty on the appointment of a new Fed chairman also affected trading. US President Donald J. Trump is leaning toward nominating Federal Reserve Governor Jerome Powell to be the next head of the Fed, two sources familiar with the matter said on Friday.
Mr. Trump has said he has been considering Mr. Powell, as well as Stanford University economist John Taylor, for the post. He also has said he has not ruled out renominating current Fed Chair Janet L. Yellen, whose term expires in February.
He is expected to announce his pick, which would need to win Senate approval, before he departs on a trip to Asia on Nov. 3.
Mr. Trump had been working from a short list of five candidates that included his top economic adviser, Gary Cohn, and former Fed Governor Kevin Warsh.
“Investors are staying on the sidelines waiting who the next Fed chief will be,” Mr. Asuncion noted.
Another trader said market players will trade with “a downward bias until such time we get to know specifically who the next Fed chair would be.”