Peso up on drop in oil prices, dollar
THE PESO rose against the greenback on Wednesday after global oil prices went down to three-week lows and the dollar slightly eased against other major currencies.
The local currency closed at P56.71 versus the dollar on Wednesday, strengthening by seven centavos from Tuesday’s P56.78 finish, data from the Bankers Association of the Philippines’ website showed.
The local unit opened Wednesday’s session weaker at P56.82 per dollar. Its intraday best was at P56.67, while its worst showing was at P56.85 against the greenback.
Dollars traded went up to $1.53 billion on Wednesday from the $932.2 million on Tuesday.
The peso rose against the dollar on Wednesday due to lower global crude oil prices recently, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Oil prices lingered among three-week lows on Wednesday with the NYMEX crude oil benchmark at around $88 per barrel compared with the high of $95.03 seen on Sept. 28, Mr. Ricafort said.
The peso also appreciated after the US dollar weakened slightly against other major currencies since reaching 10-month highs recently, he added.
The US dollar likewise eased against the Japanese yen but still remained above 149 yen a dollar due to a potential intervention from the Bank of Japan, Mr. Ricafort added.
“The peso appreciated ahead of a likely softer US private employment report overnight,” a trader added in an e-mail.
For Thursday, the trader said the peso could strengthen further against the dollar as September inflation could have picked up.
This could prompt the Bangko Sentral ng Pilipnas (BSP) to implement a rate hike at its Nov. 18 meeting, the trader added.
The trader sees the peso moving between P56.55 and P56.80 a dollar on Thursday, while Mr. Ricafort expects it to range from P56.60 to P56.80.
PESO MAY WEAKEN FURTHERMeanwhile, the peso could trade at the P57-a-dollar level until the third quarter of 2024 amid elevated inflation, although a hawkish BSP could provide support to the currency, MUFG Global Markets Research said in a report.
“We forecast gradual weakness in the peso against the US dollar at P57.30 in three months and P57.50 in 12 months… Risks to our peso forecasts come from oil, rice, and the US dollar,” it said.
“Latest high frequency data shows that rice prices have moderated in September following the imposition of the price ceiling. However, risks to inflation are still tilted to the upside, including further increases in global food and energy prices, coupled with potential hikes in jeepney fares and minimum wages,” it added.
MUFG Global Markets Research expects the peso to end the first quarter of 2024 at P57.50 and to stay at that level until the third quarter of 2024.
It previously saw the peso closing at P56.20 per dollar at end-2023, P55.50 by the end of the first quarter of 2024, and P55.20 in the second quarter.
The central bank expects inflation to return to its 2-4% annual target next month, barring any supply shocks, BSP Governor Eli M. Remolona earlier said.
Still, the peso could be supported by a hawkish central bank, MUFG Global Markets Research said, adding they expect another rate increase from the BSP if inflation risks grow.
Meanwhile, they expect the BSP to cut borrowing costs by 50 basis points in the second half of 2024.
Mr. Remolona earlier said they are open to hiking rates outside of their scheduled policy meetings, ruling out easing in the near term.
The peso could also be supported by a narrowing current account deficit and improved foreign direct investments next year, MUFG Global Markets Research added. — AMCS
