Peso slips on Abe’s big win, lack of leads

THE PESO slid on Monday as it tracked the yen’s decline after Japan’s Prime Minister Shinzo Abe scored a big win in Sunday’s election, while local players looked for fresh leads.

The local currency closed at P51.51 versus the greenback on Monday, shedding six centavos from the P51.45 per dollar close on Friday.

It first opened at P51.49, with its trough reaching P51.55 against the dollar, while its intraday peak stood at P51.46.

Dollars traded were valued at $439 million from the $530.1 million recorded in the previous session.

Traders said the local pair traded in a tight range amid lack of catalysts, and weakened due to the US Senate’s passage of the budget blueprint — which boosted hopes for the tax reform.

“We’re just consolidating today. In a way were still looking for fresh leads,” a trader said in a phone interview yesterday.

“But we’re looking at a strong dollar move globally, as the US tax reform bill is supportive of the US dollar,” the trader said, noting that the market was also waiting for hints on US President Donald J. Trump’s pick for the top post of the Federal Reserve Board.

“Traders were also waiting for the final revenue estimates of the tax reform here,” added the trader.

Guian Angelo S. Dumalagan, market economist of the Land Bank of the Philippines, attributed the peso’s decline to results of the national elections in Japan on Sunday.

“The peso depreciated today, tracking the weakness of the yen following the victory of Prime Minister Shinzo Abe,” he said in an e-mail.

“Market movements were generally muted due to caution ahead of key reports and events this week, including the ECB (European Central Bank) monetary policy meeting,” he added.

Mr. Dumalagan said traders may take profit ahead of the ECB interest rate decision, and position ahead of the third-quarter growth data from the US to be released on Friday.

The trader sees a P50.30 to P50.50 range for today’s trading, while Mr. Dumalagan sees the exchange rate moving between P51.40 to P51.60 against the greenback.

ASIAN FX
At the same time, most emerging Asian currencies started the week on a bearish note as investors focused on the greenback, hoisted up by the US Senate’s approval of a budget blueprint.

US President Donald Trump’s plans of implementing a tax reform took a step forward on Friday as a budget blueprint was passed, giving Republicans a chance to overhaul the tax code without Democratic support.

Senate Republicans are under immense pressure to succeed with tax reform after Trump’s health care plans failed to gather enough support.

Christopher Wong, an FX strategist with Malayan Banking Berhad, said that as Trump’s promises for policy reforms faltered, markets grew increasingly disappointed.

“We saw the initial run-up in USD strength post-Trump victory being more than reversed in the past 9 months,” he said.

Renewed expectations of progress in tax reform revived the hope that increased health care and infrastructure spending could also be implemented, supporting growth and leading to higher inflation, which would in turn spur tighter monetary policy, Mr. Wong added.

“Both these… fiscal and monetary impulses could surprise to the upside for the US dollar,” Mr. Wong said.

The dollar index extended gains to rise up to 0.2%.

The dollar also took support from the depreciating Japanese yen which was led lower by Japan’s ruling party winning a super majority in Sunday’s election, boosting confidence that Mr. Abe’s yen-weakening fiscal and monetary expansion policies would continue. — Elijah Joseph C. Tubayan with Reuters