Peso falls on profit-taking

AFP FILE PHOTO

MANILA, Philippines—The peso fell on the first trading day of the week as investors sold the local currency for profit-taking following last week’s significant purchases.

The local currency closed at 41.61 against the US dollar, down by 19 centavos from Friday’s finish of 41.42:$1.

Intraday high hit 41.33:$1, while intraday low settled at 41.635:$1.

Volume of trade amounted to $700.58 million from $1.232 billion previously.

Traders said investors who bought pesos and peso-denominated instruments in the past days sold their holdings to generate profits. As a consequence, the local currency fell in value against the greenback.

The general outlook for the remainder of the year, however, is for the peso to remain relatively strong and stay within the 41 to 42 band against the US dollar because of the country’s much favorable macroeconomic fundamentals vis-à-vis those of advanced economies.

Traders also said the new round of bond-buying by the US Federal Reserve would boost demand for pesos and peso-denominated assets.

The US Federal Reserve last week announced it would implement a third round of “quantitative easing,” or QE3, as a means to stimulate the still lackluster growth of the US economy.

Quantitative easing is the process of stimulating an economy by a central bank, such as via buying of bonds.

Traders said a portion of the liquidity to be injected by the US Fed would spill over to emerging markets like the Philippines. In particular, some of the funds may be used to buy emerging market assets, such as peso-denominated stocks and bonds.