Peso rebounds vs dollar ahead of BSP policy decision

THE PESO closed stronger against the dollar on Thursday amid positive developments offshore and ahead of the Monetary Board’s policy meeting.

The local currency ended at P48.58 per dollar on Thursday, appreciating by 8.5 centavos from its previous close of P48.68 on Wednesday, based on data published on the Bankers Association of the Philippines’ website.

The peso opened the trading session at P48.66 per dollar, which was also its weakest showing for the day. Its intraday best was at P48.56.

Dollars that changed hands went up to $691.29 million yesterday from $649.75 million on Wednesday.

“The peso strengthened following dovish hints from BSP (Bangko Sentral ng Pilipinas) Governor (Benjamin E.) Diokno ahead of the BSP policy meeting today that prematurely ending accommodative policy is still unwarranted. The local currency might weaken from safe-haven demand after the BSP revised its inflation projections,” a trader said in an email on Thursday.

The BSP said after the market closed that the Monetary Board kept the overnight reverse repurchase rate at an all-time low of 2%, as expected. The rates on the lending and deposit facilities were also maintained at 2.5% and 1.5%, respectively.

Meanwhile, it raised its inflation forecast for 2021 to 4.2% from the 4% given in February, while the 2022 outlook was hiked to 2.8% from 2.7% previously, BSP Deputy Governor Francisco G. Dakila, Jr. said yesterday.

“The peso was also stronger versus the US dollar after global oil prices eased to three-week lows and the benchmark 10-year US government bond yield eased to the lowest in more than a week,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Global oil prices fell by over two percent on Thursday on growing fears over renewed lockdowns abroad, Reuters reported. Brent crude went down by $1.33 to $63.08 per barrel.

Meanwhile, the yield on the benchmark 10-year US Treasuries edged down to 1.62% on Wednesday, slightly down from 1.63% the day before.

Other positive local news may have also pushed the peso higher, including the gains in the stock market and arrival of more coronavirus vaccines, Mr. Ricafort said.

Investors anticipating the signing of a law that will bring down corporate income tax also contributed to the stronger peso, he added. The bill will lapse into law on Saturday, March 27.

For Friday, Mr. Ricafort expects the peso to range from P48.50 to P48.60 per dollar, while the trader gave a higher forecast range of P48.55 to P48.75. — B.M. Laforga