THE PESO snapped its week-long rally versus the dollar as it resumed trading yesterday as sentiment towards the United States recovered, and ahead of the release of inflation data which could dictate the next moves of the Federal Reserve.
The local unit closed at P50.975 against the greenback on Wednesday, down by seven centavos from the P50.905 finish on Monday.
Yesterday’s close was the weakest logged since a P51.095 exchange rate on Sept. 6.
Financial markets were closed on Tuesday after Malacañang suspended work in government offices in Metro Manila due to heavy rains brought about by typhoon Lannie (international name: Talim) and tropical storm Maring (Doksuri). The Bangko Sentral ng Pilipinas suspended all trading, clearing, and settlement transactions following the declaration.
Trading resumed on Wednesday with the peso opening weaker at P50.98 against the greenback. It touched P51.04 as its intraday low, while P50.90 was its best showing for the day.
Two traders attributed the sideways movement of the peso to market anticipation ahead of key developments in the global financial markets later this week, while noting that the depreciation of the peso came as the dollar bounced back from last week’s lows.
“The dollar continues to recover. I think the tension between North Korea and the US is easing, and also the impact of Hurricane Irma was not as strong as expected. We saw a correction as major currencies traded higher versus the dollar,” one trader said in a phone interview.
“Once the peso breached the P51 figure, profit taking took place.”
The trader said the peso simply consolidated, ahead of some speculation that the Bank of England might hike rates at its policy meeting later this week.
A second trader said the peso simply moved sideways yesterday as it had no new leads to ride on, with market players on a wait-and-see mode ahead of US inflation data due on Thursday.
The turnout of US inflation will provide some hints whether the Fed can still proceed with a third rate hike within the year, with market watchers now seeing a slim chance for another round of policy tightening by December.
Both traders said there were no signs that the Bangko Sentral ng Pilipinas intervened during yesterday’s session, which saw the peso close a few centavos below P51.
Dollars traded yesterday totalled $610.4 million, higher than the $436 million which exchanged hands on Monday but hitting the average volume seen daily.
For today, the two traders expect the peso to trade between P50.90-P51.10, moving sideways until the market receives key data which will be reflected during Friday’s session. — Melissa Luz T. Lopez