Peso strengthens on profit taking ahead of likely weak US GDP data

peso dollar 032018 - Peso strengthens on profit taking ahead of likely weak US GDP data

THE PESO finished stronger on Thursday ahead of an expected downward revision in US economic growth data.

The local unit ended at P52.18 against the greenback yesterday, up 14.1 centavos from Wednesday’s P52.321-to-a-dollar close.

The peso opened at P52.35 versus the dollar. Its closing level was its best intraday showing, while its lowest point was seen at P52.40 against the greenback.

Dollars traded on Thursday increased to $1.148 billion from Wednesday’s $1.107 billion.

“The peso strengthened amid profit-taking as market participants have started to anticipate for a downward revision in second-quarter US GDP (gross domestic product) report [Thursday night],” a trader said in an e-mail.

Another trader interviewed via phone said the local currency went up amid rising investor risk-on sentiment as the market awaits the resolution of the trade war between the US and China.

“We are waiting for further development. Meanwhile, as the truce between the two countries holds up for the time being, it’s good for the peso,” the trader said.

The US economy grew 2.1% year on year during the second quarter, slowing from the first quarter’s 3.1% pace. But economists expects that this print will be revised lower.

Meanwhile, the US Trade Representative’s office said the initial round of a 15% tariff will be imposed on over $125-billion worth of Chinese goods beginning Sept. 1.

The remainder of the $300-billion list of China-made goods will be slapped with the levy starting Dec. 15.

US President Donald J. Trump announced the increase in the planned tariff to 15% from 10% last Friday on Twitter, escalating the bitter US-China trade war after Beijing hit back with retaliatory tariffs on $75 billion worth of US goods, including crude oil.

Today, the peso is expected to decline anew on likely strong US data.

“The local currency might weaken ahead of likely firm US Personal Consumption Expenditure inflation report [today],” the first trader said.

The first trader sees the peso moving from P52.10 to P52.30 against the dollar today, while the second trader expects it to play within the P52.00-P52.40 range.

Most emerging Asian currencies slipped on Thursday, as global recession worries and anxiety over the Sino-US trade tussle capped risk appetite while higher oil prices weighed on India’s rupee.

Global bond yields clung near record lows, while the inverse US yield curve, in which long-date yields are lower than their short-dated counterparts, stoked fears of a future recession.

Bets on safe haven assets picked up, with gold prices surging to near six-year highs, while the Japanese yen traded 0.2% higher. — Mark T. Amoguis with Reuters

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