Peso inches up vs dollar as surprise rate increase boosts market sentiment

THE PESO inched up against the dollar on Monday as the central bank’s surprise rate hike last week continued to boost market sentiment. — BW FILE PHOTO

THE PESO inched higher versus the greenback on Monday following the off-cycle hike of the Bangko Sentral ng Pilipinas (BSP) last week and amid a decline in local pump prices.

The local unit closed at P56.35 per dollar on Monday, moving sideways from its P56.36 finish on Friday, Bankers Association of the Philippines data showed.

The peso opened Monday’s session stronger than its Friday close at P56.30 versus the dollar. Its lowest showing for the day was at P56.39, while the peso’s intraday best was at P56.27 against the greenback.

Dollars exchanged declined to $561.75 million on Monday from $678.3 million on Friday.

“The peso slightly appreciated from the lingering impact of the strong BSP rate hike last week,” a trader said in a Viber message.

The BSP, in an off-cycle move, raised its benchmark interest rates by an all-time high 75 bps on Thursday amid growing risks to inflation.

BSP Governor Felipe M. Medalla said the “significant” hike was due to signs of “sustained and broadening price pressures” as well as spillover effects from aggressive tightening in other countries, such as the United States, amid global inflation concerns.

On Friday, Mr. Medalla said he would not rule out another interest rate increase in the Monetary Board’s August review, although the need for a 50-bp hike at that meeting is “much less now” following their off-cycle move.

Headline inflation was at a near four-year high of 6.1% in June, exceeding the central bank’s 2-4% target for a third straight month. This brought the first-half average to 4.4%, still below the BSP’s full-year forecast of 5%.

The peso also strengthened following the announcement of a third consecutive round of rollbacks in local pump prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message on Monday.

“Market sentiment also supported by another price rollback in local fuel pump prices as global oil prices remained among two-month lows recently, as well as the recent easing of US Treasury yields amid US recession concerns and softer China economic data recently due to some lockdowns/COVID concerns,” Mr. Ricafort said.

Oil companies announced that fuel prices will be rolled back again on Tuesday, July 19, marking the third straight week of price cuts.

“Peso also slightly stronger after the PSEi corrected higher (considered a healthy upward correction after declining for 4 straight trading days),” Mr. Ricafort said.

The Philippine Stock Exchange index went up by 73.52 points or 1.18% to close at 6,268.78 on Monday, while the broader all shares index increased by 24.33 points or 0.72% to 3,370.06.

For Tuesday, the trader said “the local currency might appreciate tomorrow ahead of potentially strong Euro zone inflation report.”

Both the trader and Mr. Ricafort gave a forecast range of P56.20 to P56.40 per dollar for Tuesday. — Keisha B. Ta-asan