Peso weakens to 45.37:$1 on Fed taper expectations

The peso fell against the dollar for the third consecutive trading day, as the market adopted a risk-off sentiment taken by other emerging markets.

 

Markets expect the Federal Reserve to slash by another $10 billion its bond purchases during this week's meeting.

 

The local currency softened by 6 centavos to 45.37:$1 from 45.31 Friday close. It reached a session's low of 45.45 Monday.

 

This was the peso's weakest in 41 months since it closed at 45.52 on August 24, 2010.

 

The peso eased on "weak emerging markets and strong dollar across the board," Security Bank first vice president for treasury group Andre Ibarra told GMA News Online.

 

"Everyone is thinking the US economy will be strong this year, leading funds to exit emerging markets and going into developed markets like the US, as the Fed tapers its bond purchases," he added.

 

Most emerging Asian currencies tumbled on Monday as a global sell-off of riskier assets intensified due to the financial turmoil in Argentina, fears of a sharper slowdown in China and expectations that the Fed will continue to trim its bond-buying program, Reuters reported.

 

The market started the day with corporate demand for the dollar, pulling the peso to open at 45.38, a trader at a local bank said in a separate interview.

 

"Investors are buying on dips and the peso recovered mainly due to profit-taking on the dollar when the 45.45-level was reached ahead of central bank's intervention," the trader said.

 

On Tuesday and Wednesday in Washington, the Federal Open Market Committee or FOMC will hold its first meeting for the year, where Fed may announce another $10-billion cut from its $75 billion monthly bond-buying program.

 

"We expect the peso to be weaker as markets expect another round of cut in Fed's stimulus," Ibarra said. – VS, GMA News