THE PESO recovered against the dollar on Monday as investors pocketed gains following the local currency’s fresh low last week.
The peso ended Monday’s session at P52.49, 21 centavos stronger than the P52.70-per-dollar finish on Friday.
The peso immediately bounced back as it opened the session at P52.635 versus the greenback. It rose to a high of P52.465, while its intraday low stood at P52.64 against the dollar.
Dollars traded dropped to $637.4 million from the $719 million traded last Friday.
A trader said the peso appreciated on the back to profit-taking after it logged another low last week.
“The peso appreciated Tuesday, May 29, as investors took profits from last week’s rally of the dollar,” the trader said in an e-mail on Monday.
Last Friday, the peso closed at P52.70 per dollar, its weakest finish since July 19, 2006’s P52.745, due to the reserve requirement ratio (RRR) cut of the Bangko Sentral ng Pilipinas (BSP).
Last Thursday, the BSP announced it will trim the RRR imposed on universal and commercial banks by a percentage point to 18% effective June 1. The move will unleash approximately P90 billion into the financial system.
ING Bank N.V. Manila Branch senior economist Jose Mario I Cuyegkeng said the additional liquidity in the market weighed on the peso.
“Liquidity in the next few days will be high and work against the peso unless BSP directly intervenes in the spot market or external developments turn more friendly to emerging markets,” Mr. Cuyegkeng said in a Monday report.
The additional liquidity provided by the central bank’s move, Mr. Cuyegkeng added, was boosted further by the P130-billion maturity of some government bonds, as well as the reduction of the BSP’s weekly term deposit auction volume by P10 billion.
Meanwhile, the trader added that easing geopolitical tensions concerning North Korea “might [have] also driven some profit-taking in the dollar-peso trade.”
“However, geopolitical uncertainties in Spain and Italy might divert attention against the euro in favor of the dollar, likewise causing the peso to weaken,” the trader added.
On the other hand, another trader said the peso “tracked the other markets” with the US closed on Monday for Memorial Day.
For Tuesday, the first trader sees the peso moving between P52.35 and P52.65 versus the dollar, while the other gave a slightly slimmer forecast range of P52.45-P52.65. — Karl Angelo N. Vidal

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