By Aaron Michael C. Sy, Reporter
THE PESO strengthened on Tuesday to the P56-per-dollar level for the first time in four months, ahead of the central bank’s policy decision on Thursday.
The local unit closed at P56.96 per dollar on Tuesday, up by 35.6 centavos from its P57.316 finish on Monday, Bankers Association of the Philippines data showed.
This was the peso’s strongest finish since its P56.808-per-dollar close on April 15.
Year to date, the peso has weakened by P1.59 centavos from its P55.37 finish on Dec. 29, 2023.
The peso opened Monday’s session at P57.25 against the dollar. Its weakest showing was at P57.985, while its intraday best was at P56.92 versus the greenback.
Dollars exchanged jumped to $1.799 billion on Tuesday from $1.18 billion on Monday.
“The peso appreciated significantly below the P57 level amid expectations of a softer US producer inflation report,” a trader said in an e-mail.
Another trader said the peso strengthened against the dollar amid position taking ahead of the release of US inflation data on Wednesday.
“The Philippine peso and other Asian currencies appreciated against the US dollar, driven by a wave of risk-on sentiment. The (peso’s) rally is attributed to technical factors and market dynamics as investors anticipate key economic indicators: the US Producer Price Index (PPI) later (on Tuesday), the Consumer Price Index (on Wednesday), and the Philippine central bank’s policy decision on Thursday,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.
The Monetary Board is set to hold its policy review on Thursday. A BusinessWorld poll conducted last week showed that nine of 16 analysts surveyed expect the Monetary Board to deliver a 25-basis-point (bp) rate cut that would bring the target reverse repurchase rate to 6.25%.
However, the second trader noted that the market expects the BSP to hold rates steady on Thursday.
BSP Governor Eli M. Remolona, Jr. told reporters on Tuesday there is still “room to stay tight” due to the strong second-quarter gross domestic product (GDP) data.
Philippine GDP expanded by an annual 6.3% in the April-to-June period, quicker than the revised 5.8% growth in the first quarter and 4.3% a year ago.
For the first semester, GDP growth averaged 6%, hitting the low end of the government’s target of 6%-7% this year.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message the faster-than-expected inflation in July and strong second-quarter GDP growth reduced the likelihood of a rate cut this week.
Headline inflation accelerated to a nine-month high of 4.4% in July from 3.7% in June. It also marked the first time since November that inflation exceeded the central bank’s 2-4% annual target.
Meanwhile, Mr. Roces said the peso outlook for the rest of the year is still clouded as the BSP and the US Federal Reserve have not started easing.
For Wednesday, the first trader said the peso could continue strengthening ahead of US inflation data.
The first trader sees the peso moving between P56.80 and P57.05 a dollar, while the second trader expects it to range from P56.80 to P57.20. Mr. Ricafort sees the peso ranging from P56.85 to P57.05.
