Peso strengthens as BSP keeps interest rates steady

THE PESO strengthened on Thursday as markets expected the central bank to keep rates steady at its policy meeting later in the day.

The local unit finished trading at P50.68 versus the greenback on Thursday, rising by 14 centavos from its P50.82 a dollar close on Wednesday, according to data from the Bankers Association of the Philippines.

The peso opened weaker at P50.93 per dollar. Its weakest point for the day was at P50.95, while its best showing against the dollar was at P50.68.

Dollars traded on Thursday slipped to $1.17 billion from the $1.464 billion recorded on Wednesday.

A trader said the peso’s rebound came on the back of market expectations that the central bank would keep policy rates on hold.

“The peso strengthened from market expectations that the Bangko Sentral ng Pilipinas (BSP) is expected to hold policy rates in today’s Monetary Board meeting,” a trader said in an email on Thursday.

“The peso closed stronger today after the BSP kept its policy rates, resulting in wider interest rate differentials in favor of the peso. Peso still traded among the strongest versus [its performance] in 22 months or since January 16,2018 when it closed at P50.49,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message on Thursday.

The BSP’s Monetary Board, at the close of markets yesterday, said it kept untouched the rates for its overnight reverse repurchase, as well as overnight deposit and lending facilities to four percent, 3.5%, and 4.5%, respectively, citing cooling inflation.

“Latest baseline forecasts of the BSP continue to indicate that inflation is likely to settle within the lower half of the target band (2-4%) for 2019 up to 2021, with the balance of risks to the inflation outlook leaning toward the upside for 2020 and toward the downside for 2021,” BSP Deputy Governor Francisco G. Dakila Jr. said in a briefing Thursday afternoon.

The central bank this year slashed benchmark rates by a total of 75 basis points (bp) through three 25-bp cuts in May, August, and September.

BSP Governor Benjamin E. Diokno had said previous interviews with ANC and Bloomberg that the central bank is “likely done” in pushing for rate cuts this year.

Mr. Diokno has also said that the current monetary policy in place “remains appropriate” as the economy is back on track to a stronger growth path.”

For today, the trader sees exchange rates moving within the P50.65 to P50.85 range, while Mr. Ricafort had a forecast of a P50.55-P50.85 band. — Luz Wendy T. Noble

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Philippines Banking and Finance: Peso strengthens as BSP keeps interest rates steady
Peso strengthens as BSP keeps interest rates steady
Philippines Banking and Finance
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