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Peso plunges on strong US data

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THE PESO plunged against the dollar on Wednesday, dragged by reduced expectations of a rate cut by the US Federal Reserve due to upbeat June US retail sales data.

The local unit closed yesterday’s session at P51.13 versus the greenback, 23 centavos weaker than its P50.90-a-dollar finish on Tuesday.

The peso traded within a wide range, opening the session at P50.95 per dollar. It slipped to as low as P51.16, while its intraday high stood at P50.88 against the greenback.

Trading volume climbed to $1.208 billion from the $1.045 billion that changed hands the previous session.

Traders attributed the decline of the peso to the dollar’s ascent, driven by the upbeat June US retail sales data.

The US Commerce Department reported retail sales climbed 0.4% last month as households bought more automobiles and other goods.

“In the morning session, the peso went as high as P50.88, but as the dollar strength continued, the dollar-peso moved lower on the back of short positioning covering among banks,” the trader said in a mobile phone interview.

“Somehow it’s a panic move to cover their short positions since they’re seeing strong dollar.”

Another trader said the release of the stronger-than-expected US retail sales report reduced market expectations of a strong policy cut by the Fed by the end of the month.

“We also saw US Treasury yields also climbing up also due to this upbeat retail sales data,” the first trader added.

The US central bank is expected to cut rates for the first time in a decade at its July 30-31 policy meeting. Fed chair Jerome Powell hinted on a cut in benchmark rates, saying it will “act as appropriate” to sustain economic expansion.

For today, the first trader expects the peso to trade between P51.10 and P51.30 versus the dollar, while the other gave a P51-P51.30 range. — Karl Angelo N. Vidal

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