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Peso slips on cautious markets

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THE PESO inched lower against the dollar on Monday as market players were cautious due to possible interest rate hikes coming from central banks here and in the US.

The local currency ended yesterday’s session at P52.04 versus the greenback, a centavo weaker than the P52.03-per-dollar finish on Friday.

The peso opened session stronger at P51.95 per greenback. Its intraday low stood at P52.07, while its best showing was at P51.92 versus the US currency.

Dollars traded decreased to $507.9 million yesterday from its $592.1 million finish the previous session.

“The peso closed sideways as investors remained cautious on the dollar in view of March rate decisions by the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve,” a trader said in an e-mail on Monday.

The Fed is widely expected to raise rates later this month, and two more times before the end of the year. Traders stuck to those expectations after a government report early Friday showed job gains surged in February but average hourly wages rose just four cents, slower than expected.

On the sidelines of an event in Makati City on Monday, BSP Governor Nestor A. Espenilla, Jr. said the Philippines does not need to follow the Fed’s move to tighten its monetary policy settings.

“People seem to want us to follow the US’ four rate hikes. But I think it is important to say if you look at the policy stance of the US by comparing its policy rate vis-à-vis its inflation, it is a much looser position than where we are, so why should we follow rate hike one-for-one,” Mr. Espenilla said, adding that the country’s monetary authority allows exchange rate flexibility.

“We are not married to the idea that the peso is of this value come hell or high water it must stand at this value. We let it move,” he said.

“It’s an appropriate response. The current account is widening, exchange rates move, and it creates a self-collecting mechanism so that’s part of the policy combination that we consciously chose.”

Meanwhile, another trader said the peso moved sideways yesterday as banks ignored the US jobs data as well as the domestic balance of trade data released on Friday.

“For today, I think [the data] were ignored,” he said.

The country’s balance of trade stood at a $3.32-billion deficit in January, higher than the $2.47 billion deficit booked in the same period last year, preliminary data showed.

Meanwhile, the US economy added 310,000 jobs in February, according to the US Labor Department. However, the unemployment rate remained steady at 4.1% last month, its lowest since December 2000.

For today, two traders see the peso moving between P51.90 and P52.10, while the first trader gave a slightly wider forecast range of P51.90 to P52.20.

“Rates are still expected to move sideways ahead of uncertainty to the US February inflation data to be released [today],” the first trader noted. — Karl Angelo N. Vidal with Reuters