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Peso strengthens further on profit taking ahead of holidays

by December 21, 2017 General

THE PESO continued its rally against the dollar on Thursday as market players took profits ahead of the holiday season.

The local currency closed the session at P50.24, climbing five centavos from the previous day’s finish of P50.29 versus the greenback.

The peso opened stronger at P50.10 versus the dollar, which was also its best showing yesterday. Its intraday low, meanwhile, stood at P50.26 against the greenback.

Dollars traded soared to $630.2 million from the $490.8 million that changed hands a session ago.

A trader said the slight uptick of the peso yesterday was due to “profit taking ahead of the holiday season despite positive news regarding the US economy.”

The Republican-controlled US House of Representatives gave final approval on Wednesday to the biggest overhaul of the US tax code in 30 years, sending a sweeping $1.5-trillion tax bill to President Donald J. Trump for his signature.

In sealing Mr. Trump’s first major legislative victory since he took office in January, Republicans steamrolled opposition from Democrats to pass a bill that slashes taxes for corporations and the wealthy while giving mixed, temporary tax relief to middle-class Americans.

The House approved the measure by 224-201, passing it for the second time in two days after a procedural foul-up forced another vote on Wednesday. The Republican-led Senate had passed it 51-48 in the early hours of Wednesday.

Meanwhile, UnionBank of the Philippines (UnionBank) Chief Economist Ruben Carlo O. Asuncion noted that yesterday’s sideways movement can be attributed to continued optimism on the local tax reform bill.

“[The] dollar was little changed, again [due to] optimism on the result of the tax reform,” Mr. Asuncion said, noting that the market is on a wait-and-see mode as President Rodrigo R. Duterte is set to veto some provisions in the first tax reform package, which was signed into law on Tuesday.

On Wednesday, Budget Secretary Benjamin E. Diokno said the Department of Budget and Management has submitted a list of provisions the president can veto in the tax overhaul, as well as in the 2018 budget.

Mr. Diokno added that Mr. Duterte can “exercise his right for line item veto” when it comes to tariff, budget and tax.

“[The foreign exchange] is still very positive in terms of its response to the tax reform not until if we see some significant parts the president will veto,” Mr. Asuncion added.

For today, UnionBank’s chief economist expects the peso to trade between the P50.05 and P50.45 level, while another trader sees the local currency moving from P50.15 to P50.35.

“The local currency is expected to appreciate further amid profit-taking due to the fact that the markets recently already factored in major possible market movers and started to sell off their positions as the year ends,” a trader said.

Meanwhile, most Asian currencies edged higher against the dollar on Thursday, with the rupiah leading the gainers in the region and touching a two-week high after Fitch Ratings upgraded Indonesia’s credit rating.

“Asian currencies are trading firmer today, led by the Indonesian rupiah which jumped after a Fitch upgrade and a strong yuan fixing earlier,” Peter Chia, foreign exchange strategist at United Overseas Bank (UOB) in Singapore, said on Thursday.

The dollar index, which measures the greenback against a basket of six major currencies, was nearly flat at 0437 GMT.

The South Korean won and the Taiwan dollar gained as much as 0.1% and 0.2% respectively. — KANV with Reuters