Peso strengthens on Summers' withdrawal from Fed chair race

The peso gained strength, along with Asian currencies, against the dollar after news that Lawrence Summers pulled out of the race to lead the Federal Reserve.

The local currency gained 25 centavos to end Monday's trading at 43.61:$1 – a session's high – from 43.86:$1 Friday. Trading volume leaped to $1.429 billion from $981.5 million.

“Offshore bullishness was the order of the day,” a trader at a local bank said.

The trader noted that most investors the world over sold the dollar down after the news broke out that Summers withdrew from the Fed chairmanship race.

Summers has been viewed by investors as hawkish, or pro-hiking interest rates sooner perhaps compared with Janet Yellen – the woman in the running for Fed chairperson.

In a separate interview, a second trader said the weak retail sales data bolstered the view that the Fed's winding down of bond purchases may not be as aggressive as originally markets around the world saw.

“A lot of people have their heads at a $10-billion cut in stimulus, and that's the working number,” he said.

Over the weekend, the US Commerce Department showed retail sales rising by a mere 0.2 percent last month, still painting a soft economy, Reuters reported.

The second trader noted that the two developments in the American front propped up Asian currencies.

Meanwhile, the Bangko Sentral ng Pilipinas was seen aggressively bought dollars, helping cap the peso's strength, traders said.

The second trader said the Bangko Sentral's dollar-buying were meant to stem the peso's appreciation as well as to build a war chest ahead of the Fed meeting later this week.

“They were quite aggressive... Almost half of the volume was accounted for by BSP,” the first trader said.

The Federal Open Market Committee will meet September 17 to 18 and is expected to announce its next steps on the $85-billion bond buying stimulus. — VS, GMA News

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