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Peso weakens amid lack of leads

by December 27, 2016 General

Posted on December 28, 2016

THE PESO weakened anew against the dollar yesterday due to quiet trading among market players amid lack of global and domestic economic leads ahead of 2016’s close.

The peso ended at P49.81 against the dollar on Tuesday, four centavos lower from its finish of P49.77 versus the greenback in Friday’s session.

Local financial markets were closed on Monday for a holiday.

The local unit traded mostly sideways for the day after it opened the session at P49.80 against the greenback, while its intraday low was at P49.835. The peso’s strongest point for the day was logged at P49.78 a dollar.

Dollars traded on Tuesday totalled $209.5 million, lower than the $257.9 million that exchanged hands the previous session.

Traders said the market was generally quiet yesterday given the holiday season and as banks preferred to keep their current positions as year is about to end.

“Peso-dollar trading was quiet, given the total dollars traded, because I still think the banks are just trading their corporate flows or demand, so it’s only build-on demand or flow of their bank clients. It’s just been consolidating, so it’s quiet,” a trader said in a phone interview yesterday.

“Expect markets to move after the New Year and expect that quiet trading will be the same thing to happen until the next few days up to yearend,” the trader added.

Similarly, another trader said: “We saw generally quiet market as a lot of market players are still on a holiday.”

“The market’s quiet trend will be the same until the end of the year, it will be range-bound,” the trader added.

Meanwhile, asked how the peso fared versus other regional currencies’ performance against the dollar, one trader said: “Against regional peers, it was somewhat weaker against the dollar but still the movement was not as strong as expected because I doubt banks have interest to trade before yearend.”

“Most likely banks are closing their position for their clients,” the trader added.

For today, one trader sees the peso-dollar pair ranging within P49.75 to P49.85, while the other said that the peso may still move within the P49.70- to P49.90-per-dollar band.

The South Korean won touched a nine-and-a-half-month low against the dollar on Tuesday, with most Asian currencies retreating as a rise in US bond yields helped bolster the greenback.

The won led losses among Asian currencies with a drop of 0.4% on the day. It touched a low of 1,207.4 per dollar, the weakest level since March 11.

The Taiwan dollar slipped to as low as 32.282 per US dollar, its lowest level since July 7. It later pared its losses and was last steady on the day.

Most other Asian currencies sagged on a day when the US dollar was firmer against major peers, supported by a slight rise in the US 10-year Treasury yield in Tuesday’s Asian trading.

Emerging Asian currencies have declined broadly since early November as US bond yields jumped on expectations that US President-elect Donald J. Trump’s proposals for infrastructure spending and tax cuts will boost economic growth and inflation.

Worries about Mr. Trump’s stance on trade have also weighed on the currencies of export-dependent countries in Asia.

Mr. Trump has pledged to redraw trade deals to win back American jobs, and has threatened to hit Mexico and China with high tariffs once he takes office on Jan. 20.

Last week, Mr. Trump named Peter Navarro, an economist who has urged a hard line on trade with China, to head a newly formed White House National Trade Council.

“It does bring home the point that Trump has got some axe to grind… when it comes to bilateral negotiations with China and these will not be without impact for the rest of Asia given the supply-chain linkages,” said Vishnu Varathan, a senior economist for Mizuho Bank in Singapore, referring to Mr. Trump tapping Navarro for the trade advisory role.

Lingering concerns about China’s economic outlook are also weighing on the South Korean won and the Taiwan dollar, he said.

“It is not going to move in a straight line but the tendency may be more towards weakness than not for these currencies,” added Varathan, regarding the outlook for the won and the Taiwan dollar in the first quarter of 2017.

The Singapore dollar eased 0.1% to 1.4492 per US dollar.

Wariness toward the risk that the central bank could intervene if the city-state’s currency slips to levels beyond 1.45 per US dollar helped limit the Singapore dollar’s losses.

The Singapore dollar had posted mild gains last Friday after suspected US dollar-selling intervention by the city-state’s central bank. The suspected intervention came after the Singapore dollar touched a seven-year low of 1.4517 on Thursday. — Janine Marie D. Soliman with Reuters