BusinessWorld: Peso weakens ahead of court verdict on Erap

The peso on Monday weakened against the dollar ahead of the verdict on former President Joseph Estrada’s plunder case at the Sandiganbayan on Sept. 12. Traders also traced the dip to global risk aversion and declining local and regional stocks. "Markets right now are in a defensive mode ahead of the announcement of the verdict on Erap’s case," said Paul Joseph M. Garcia, chief investment officer at ING Investment Management. Global risk aversion over the recent US economic data pointing to a higher probability of economic recession in the world’s biggest market further pushed the peso down, Mr. Garcia added. The peso closed at P46.70, 17 centavos weaker than Friday’s P46.53 finish. It opened weak at the day’s low of P46.75, before it momentarily reached a high of P46.65. The peso’s lackluster performance on Monday was also in reaction to the Dow Jones’ 1.87% decline on Friday night. Regional stocks followed suit, with the local stock market dipping by 1.57% at Monday’s trading. Corporate demand for dollars, although minimal compared with the demand from oil and power firms last week, also contributed to the peso’s depreciation, a currency trader said. "The market is very reactive. Investors are not in aggressive positions. No one’s positioning himself heavily. Everything will depend on the Estrada verdict," the trader said. The peso is expected to test the P47 level in the following days as investors wait for the court verdict and on the US Federal Reserve’s policy move on Sept. 18. "It seems that the market is factoring in the Fed’s rate cut. It’s hard to read the market right now but P47 level is psychological. That will be tested this week," Mr. Garcia said. The peso averaged at P46.70, down from Friday’s P46.526. Total volume went up to $405 million from $364.27 million. — Gerard S. dela Peña