Peso weakens further as players position ahead of Fed rate hikes

THE PESO extended its decline against the greenback and sank deeper within the P50-per-dollar level on Tuesday as market players position ahead of expected rate hikes from US Federal Reserve this year.

The local currency ended yesterday’s session at P50.29 against the greenback, 14 centavos weaker than its P50.15-per-dollar finish on Monday.

The peso traded weaker the whole day, opening the session at P50.18 versus the dollar. Yesterday’s worst showing was at P50.34, while its intraday high stood at P50.155 against the greenback.

Dollars traded spiked to $917.2 million from the $ 797.1 million that changed hands in the previous session.

“Investors are already counting in the probable rate increases, so they’re already positioning themselves,” Ruben Carlo O. Asuncion, UnionBank of the Philippines chief economist, said over the phone on Tuesday.

“The peso continued to weaken for today amid apparent consensus among various Federal Reserve officials in projecting on at least two rate hikes for 2018,” a trader said on Tuesday, noting that this is boosting the dollar, causing it to strengthen against the local currency.

A second trader said the weaker peso yesterday was in line with the weakness of the other regional currencies, which were also dampened by the stronger greenback.

Meanwhile, Mr. Asuncion noted that remittances after the holiday season have already dissipated, giving the peso less tailwind.

In the past two weeks, the peso strengthened against the greenback, reaching the six- month high of P49.81, as the influx of remittances pushed peso higher.

Asked if the Bangko Sentral ng Pilipinas (BSP) intervened, two traders said it is possible.

“Probably,” Mr. Asuncion speculated. He added that the BSP, though undisclosed, sometimes intervenes in trading to smoothen the volatility.

“If there’s a huge jump in the volume, it’s safe to assume that they [intervened].”

For today, two traders expect the peso to move between P50.10 and P50.40, while the first trader gave a slightly lower range of P50.15 to P50.45.

“The local currency is expected to slightly recover [ today] following the release of November local trade data, which are viewed to come better than previous readings,” the first trader said.

Most emerging Asian currencies made only modest moves on Tuesday, with gains capped as a retreat in the euro helped the US dollar strengthen against most of its counterparts.

The greenback rose to a more than one-week high against a basket of other major currencies on Monday, supported by a fall in the euro as investors were cautious after a months-long rally. •