Peso climbs on BSP intervention

THE PESO started the week stronger versus the greenback, erasing a near 11-year low logged the previous session, after it tracked regional peers and buoyed by the central bank’s intervention intraday to limit the local currency’s sharp swings.

The peso closed at P51.24 against the dollar on Tuesday, gaining 25 centavos from Friday’s finish of P51.49 per dollar, which was the local unit’s weakest finish in almost 11 years or since it ended at P51.60 per dollar on Aug. 24, 2006.

The peso opened the session at P51.45 against the dollar. Its intraday trough was seen at P51.50 versus the greenback, while its best showing was the day’s close.

Trading volume was at $572.2 million on Tuesday, slumping from the $1.006 billion that changed hands in the previous session.

Traders attributed the peso’s strong close against the dollar to the Bangko Sentral ng Pilipinas’ (BSP) intervention during the session.

“Today’s session opened flattish and traded a bit firm in the close after the BSP stepped in during the P51.50-to-the-dollar level intraday, which spooked the market quite a bit,” one trader said by phone on Tuesday.

“After the peso broke the P51.40 per dollar level intraday, those in long positions were washed out,” the trader noted.

Meanwhile, another trader said: “The peso appreciated as the dollar weakened amid political concerns in the US. There was also some BSP intervention observed.”

The BSP sometime steps in the foreign exchange trading to temper the peso’s sharp swings against the dollar.

Meanwhile, the first trader also noted the peso tracked regional currencies. “Intraday move was pretty a volatile session because there were some position adjusted that happened today, which contributed to the trading.”

For Wednesday, one trader sees the exchange rate settling at P51.15 to P51.35, while the other trader said the peso could range within P51.10 to P51.40-to-the dollar.

ASIAN CURRENCIES RISE
Asian currencies edged up on Tuesday, with the dollar in a more defensive stance, but analysts said regional currencies’ short-term fate could be decided by the annual central banking conference in Jackson Hole this week.

The dollar index inched up after falling as much as half a percent the previous day, easing further off three-week highs struck last Wednesday. The greenback has come under pressure from North Korea tensions and also tepid US inflation figures that have cast doubt on further monetary tightening.

“Asian currency movements will depend on what Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi will speak in the meeting,” said Qi Gao, Asia Foreign Exchange (FX) Strategist at Scotiabank.

He added that if they mention more about balance-sheet widening and exiting monetary stimulus, then we could see emerging Asian currencies decline.

“But if they sound a bit dovish, we will see a modest risk- on sentiment after the meeting.”

Sim Moh Siong, FX strategist at Bank of Singapore, said while there is no expectation of a new policy message from Draghi, the same cannot be said for Yellen.

“There is a mixed view right now whether Yellen would send a message in line with FOMC (Federal Open Market Committee) minutes, or send a message in line with what Dudley has said, which is more hawkish in nature,” he said.

“If we see a message from Yellen that despite low inflation in the US, the Fed is still set on tightening path, it could provide some support for the dollar against the Asian currencies.”

On Tuesday, the South Korean won was up more than a quarter of a percent, tracking strong gains in the domestic equities market. The yuan firmed after the central bank set the midpoint at its firmest in 11 months.

The rupiah too edged higher ahead of the central bank’s policy meeting later on Tuesday. A Reuters poll has forecast the policy rate will likely remain unchanged despite weak consumption.

Except for the peso, all other Asian currencies have risen this year. The Thai baht and Japanese yen have posted more than 7% gains against the dollar, while the Singapore dollar, South Korean won and Taiwan dollar have all firmed more than 6%.

However, some analysts said regional currencies’ gains in the coming months will be limited. — Janine Marie D. Soliman with Reuters