Peso hits 8-month low

The Philippine peso slid to an eight-month low against a broadly firmer dollar on Tuesday with the peso's drop accelerating on position unwinding after breaching a technical support level. The peso was last down 0.6 percent versus the dollar at 41.85, after falling to as low as 41.87 earlier, the peso's lowest level against the dollar since late September.
The dollar's rise to levels beyond 41.70 against the peso - a level the greenback neared but failed to breach in the last few trading sessions - prompted traders to buy back the dollar, adding to pressure on the peso, said a trader for a European bank in the Philippines.
"A lot of people are looking at 42.00 as the next resistance (for the dollar)," the trader said. Like many emerging Asian currencies, the peso has retreated in recent weeks as the greenback rallied broadly on growing speculation that the US Federal Reserve may start tapering its monetary stimulus later this year.
The most recent bout of peso weakness began last Thursday, after comments by Fed Chairman Ben Bernanke sparked worries about a potential reduction in the pace of the Fed's asset purchases. In testimony to Congress last Wednesday, Bernanke said a decision to scale back its monthly bond purchases from the current $85 billion could be taken at one of the central bank's "next few meetings" if the economy looked set to maintain momentum.
The peso, which has been a popular destination for foreign investors, had hit a five-year high of about 40.55 earlier this year, as strong economic fundamentals in the Philippines and the prospect of a ratings upgrade attracted capital inflows.
The peso, however, has failed to see sustained gains after Fitch upgraded the country's sovereign rating to investment grade in March and Standard & Poor's did the same earlier this month. Some market players have expressed caution about the outlook for Philippine assets, noting that valuations for Philippine equities have looked stretched and that such upgrade expectations had already been built into Philippine bonds.
The South Korean won edged lower, pressured by weakness in the Japanese yen, which can hurt South Korea's export competitiveness. The yen tumbled as Japanese shares appeared to be stabilising after sharp losses and extreme volatility in the past few sessions, easing worries that investors may have to close their yen-selling positions to make up for losses.
The Thai baht slipped against the dollar, with investors looking to the Bank of Thailand's interest rate decision on Wednesday for near-term direction clues. Thailand's central bank is widely expected to cut interest rates by 25 basis points to 2.50 percent on Wednesday following weak first quarter GDP data plus increased government pressure to ease policy to discourage inflows and to help exports.
In a Reuters poll, 14 out of 19 economists said they were expecting a rate cut on Wednesday, with 13 of the 14 predicting a 25 basis point cut, while one respondent was expecting a rate cut of 50 basis points. The Taiwan dollar found some support as local exporters sold the US dollar. On the flip side, foreign institutions were cited as buyers of the greenback against the Taiwan dollar.