Peso strengthens after US Fed chief’s remarks

The local unit ended Tuesday’s trading at P46.11 versus the greenback, up by 11.5 centavos compared to its previous day’s P46.225-per-dollar close.

The peso started the day at P46.16 per dollar, hitting a high of P46.10 against the greenback. It slipped to a low of just P46.26 versus the foreign unit during yesterday’s trade.

Dollars traded fell slightly to $601.2 million from $612.6 million during the previous session.

Traders attributed the strength of the local currency to the dovish tone of the Fed chairperson at her speech during a roundtable discussion at the West Philadelphia Skills Initiative on Monday.

“The peso appreciated as the dovish tone of Fed Chair Yellen’s speech further supported views of a delayed US interest rate hike this year,” a trader interviewed by phone said.

Another trader said: “[Ms.] Yellen affirmed that the central bank won’t be raising short-term interest rates until new uncertainties about the economic outlook are resolved.”

“When she spoke less than two weeks ago, she said the Fed will likely move rates up again in the coming months. This time didn’t refer to any time frame. The probability of a rate this month and in July had already come down significantly also due to the weak May jobs report,” the trader added.

Ms. Yellen said in her latest speech that she expects the US economy to continue to improve and expects gradual increases in interest rates will probably be appropriate.

“I continue to believe that it will be appropriate to gradually reduce the degree of monetary policy accommodation, provided that labor market conditions strengthen further and inflation continues to make progress toward our objective,” she said in a speech to the World Affairs Council of Philadelphia.

The Fed chief however offered no clues on the timing of the next rate increases and there was no mention of the phrase “in the coming months” that was included in remarks at Harvard University on May 27.

For today, a trader said there might be some bias in favor of the dollar as expectations weak Chinese trade report could lead to some safe haven buying.

Traders said the dollar-peso exchange rate may move within the P46 to P46.25 range today.

Most emerging Asian currencies also extended gains on Tuesday after Ms. Yellen’s cautious comments over possible US. interest rate hikes drove investors to seek higher yields in the region.

“I am inching a bit towards yield-hunting in Asia,” said Christopher Wong, a senior foreign exchange strategist for Maybank in Singapore, adding he prefers the rupiah and the ringgit.

The South Korean won surged to a near four-week high, tracking earlier moves by regional peers on catch-up demand after the country’s financial markets were closed for the Memorial Day on Monday.

Malaysia’s ringgit touched a near two-week peak as higher crude prices eased concerns over the country’s oil and gas revenues.

 

Source: Bworld Online