Peso rebounds to track yen’s climb

The peso strengthened against the dollar on Wednesday to track the Japanese yen’s continued surge along with other regional currencies. 

The currency rebounded by 11.2 centavos to finish at PHP 62.513 versus the greenback from Tuesday’s all-time low close of PHP 62.625, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Wednesday’s session stronger at PHP 62.50 per dollar and traded better than Tuesday’s finish the entire day as its weakest showing was at just PHP 62.55. Meanwhile, its intraday best was at PHP 62.43.

Trading volume climbed to USD 1.68 billion from USD 1.389 billion.

The peso and other regional currencies rose against the dollar, led mainly by the Japanese yen’s resurgence, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message

“The dollar-peso closed lower… caused by yen recovery after US Treasury Secretary Bessent challenged traders and triggered the BoJ (Bank of Japan),” a trader said in a phone interview.

The Japanese yen pushed to seven-month highs on Wednesday, keeping the dollar on the defensive, as traders grappled with oil prices breaking above USD 100 per barrel in the face of a widening war in the Middle East, Reuters reported.

The spotlight has been on the yen due to its 4% rise so far this month, shifting the calculus for the popular carry trade, in which investors borrow in yen at a low cost to invest in other currencies and assets that offer better returns.

The yen was firmer at JPY 153.32 per US dollar, close to Tuesday’s seven-month high of JPY 152.89. 

The move has been fueled by expectations for faster BoJ tightening, the prospects of Japanese investors repatriating overseas funds and pressure from Washington for a stronger yen.

Traders widely expect the BoJ to raise rates by 25 basis points at its Sept. 17 and 18 meeting, but the rally will hinge on whether BoJ Governor Kazuo Ueda follows through with hawkish comments.

Treasury Secretary Scott Bessent on Tuesday dared traders to bet against the yen, following historic joint US/Japanese intervention to boost the currency in late July to deter Tokyo from selling US Treasuries to fund the operation.

“I am the house now, so when we intervene with the Japanese yen, I have pretty good insight into what the Japanese, what the Bank of Japan is going to do, what Japanese policymakers are going to do. And you can bet against me if you want,” he told an event at the SMU Cox School of Business.

For Thursday, Mr. Ricafort expects the peso to range from P62.45 to P62.65, while the trader sees it moving between PHP 62.30 and PHP 62.60 against the dollar. — Aaron Michael C. Sy with Reuters