Tuesday, 5 January 2010

Peso jumps back to 45:$1 territory on inflows, recovery hopes

Erik de la Cruz
Business Mirror

THE peso shot higher on Monday, rallying back into the 45 territory on the first trading day of 2010 as emerging Asian currencies strengthened against the US dollar on expectations for a sustained recovery in exports this year, traders said.

The local unit was also given a boost by remittance inflows during the four-day New Year trading break, they said.

Advancing 0.5 percent from its end-2009 level of 46.20 against the dollar, the peso closed at 45.95, near the day’s high of 45.93. A total of $991.65 million changed hands on the trading platform of the Philippine Dealing & Exchange Corp., a much bigger volume compared with the $604.52-million turnover on the last trading day of 2009.

Although it hit an intraday high of 45.855 on December 8, it was the first time since August 2008 for the peso to close at the 45 level.

Traders at Metropolitan Bank & Trust Co. initially saw the dollar supported at 46.00 but for this week they set a trading range of 45.80 and 46.20.

Emmanuel Ng, a currency strategist in Singapore at OCBC Bank, said the start of the year usually sees Asian data releases coming in “thick and fast.” Thus, he said “markets will have a steady stream of data to chew on, especially with respect to the economic recovery and expectations toward Asian central bank interventions.”

Emerging markets, including those in Asia, are widely expected to lead the global recovery this year. Expectations for a rebound in developed markets also bring hope for an upturn for Asian exports this year.

“Near term we think that further confirmation of the continued improvement in Asian economic numbers will see positive sentiment toward Asian currencies accumulating,” Ng said in a note.

But this week all eyes will also be glued on fresh US data, particularly the unemployment report that will come out on Friday, traders said.

Markets “will be keen to see if there will be a follow-through after last month’s upside surprise in the nonfarm payrolls data,” said Philip Wee, a currency strategist at DBS Bank. Last month’s data helped propel the dollar as markets speculated that with a recovering US economy, the Federal Reserve was moving closer to withdrawing stimulus measures and raising interest rates.

“The dollar bulls will need another upside surprise to extend the dollar’s recovery,” Wee said. “Similarly, there is scope for the dollar to give back its gains should the number disappoint instead.”

He said the unemployment report on Friday was expected to show a rise to 9.9 percent in December from 9.8 percent in the previous month, “confirming the widely held view that the pause in the rising trend in unemployment in October was temporary.”

OCBC’s Ng said he remained “wary of a market trading prematurely on Fed rate hike prospects.”

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