Peso drops ahead of two-day break

THE PESO weakened against the dollar on Tuesday ahead of expected market inflows today ahead of a two-day trading break.

The local currency ended yesterday’s session at P52.32 versus the greenback, 11.5 centavos weaker than the P52.215-per-dollar finish on Monday.

The peso opened the session stronger at P52.15 against the dollar, while its best showing stood at P52.135. Its intraday low was at P52.33 versus the greenback, which was just a centavo below yesterday’s finish.

Dollars traded increased to $718.9 million from the $690.9 million traded on Monday.

A trader said the market saw strong dollar demand late afternoon, dampening the local currency to near its intraday low.

“I think the upsurge was due mostly on covering of sell flow tomorrow (Wednesday),” the trader said on Tuesday. “We are expecting large amount of inflow come tomorrow, that’s why there’s short covering today.”

Meanwhile, Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, attributed the weak peso to higher oil prices in the world market.

“Although the US dollar value dropped, it seems the downward pressure today came from the lingering tension in the Middle East, pushing the Brent higher,” he said in a text message.

Oil prices rose on Monday with international Brent crude futures opening above $70 per barrel for the first time since January.

Prices were lifted by expectations that Organization of the Petroleum Exporting Countries leader Saudi Arabia may extend supply cuts into 2019, as well as concerns that the United States may re-introduce sanctions against Iran.

Another trader, on the other hand, said the peso weakened as the dollar “regained strength” after the tensions between the US and China on trade policies subsided.

“The peso weakened towards the closing today after the easing of trade tensions between US and China over steel tariffs which has boosted the dollar’s recovery,” the trader said in an e-mail on Tuesday.

Last week, the local currency dropped as President Donald J. Trump slapped new tariffs on Chinese goods worth about $50 billion following a seven-month investigation into alleged intellectual property theft.

For today, the first trader expects the peso to move between P52.15 and P52.40, while the second trader gave a wider forecast range of P52 and P52.40.

“Moving forward, we expect market to cap gain because given the holidays, we will have to cover for remittance,” the first trader said. — K.A.N. Vidal with Reuters