Peso weakens further ahead of Fed meet

The peso sustained losses in line with regional weakness as investors dumped Asian currencies in favor of the US dollar ahead of the Federal Open Market Committee's (FOMC) policy meeting.

The local currency shed 25 centavos to close at 43.125:$1 versus Monday's 42.875:$1 close.

“The peso traded out of weak Asian currencies, as investors continued to favor dollars over emerging market currencies,” a trader at a local bank said.

A second trader explained investors were already betting on a possible scaling back of the US' $85-billion bond buying stimulus, dubbed quantitative easing or QE.

“It's speculative trading today, and investors were pricing in possibility of the Fed tapering off stimulus,” he said.

Speculations of the Fed easing its stimulus eroded the appeal of emerging market assets like the peso, with investors turning to safe-haven US instruments and weakening Asian currencies.

The Fed will meet on Wednesday and Thursday (Tuesday and Wednesday in the US) to discuss policy, with any announcement or hint serving as a sounding board for investors' next move in financial markets the world over.

Corporate demand, particularly from oil firms, also weighed on the peso, the second trader said.

Trading is seen to move between P42.90 to P43.40 per dollar band on Wednesday. — BM, GMA News