THE PESO declined against the dollar on Thursday to a fresh two-month low as market players awaited the policy decision of the local central bank.
The local currency ended Thursday’s session at P52.84 versus the greenback, down three centavos from its P52.81-per-dollar finish on Wednesday.
This was the peso’s fresh new low in nearly two months or since it closed at P52.86 per dollar on Jan. 24.
The peso traded within a wide range yesterday, opening the session stronger at P52.77 per greenback. It slipped to as low as P52.89 intraday, while its best showing of the day stood at P52.725 against the dollar.
Trading volume surged to $1.009 billion from the $870.8 million that switched hands the previous day.
“The peso closed weaker as market players positioned ahead of bets of dovish statements from today’s Monetary Board (MB) meeting,” a trader said in an e-mail on Thursday.
After the market’s close, the Bangko Sentral ng Pilipinas (BSP) announced that kept its policy rates steady at a 4.75-5.25% range as prevailing rates remain “appropriate” amid declining inflation.
The decision was in line with market expectations, as 10 out of 13 economists in a BusinessWorld poll last week said the central bank still has room to keep its borrowing costs steady.
Meanwhile, the BSP did not announce any cut in its reserve requirement ratio (RRR), with BSP Deputy Governor Diwa C. Guinigundo saying it is “important that we get the timing right.”
This was the first MB policy meeting presided by newly appointed BSP Governor Benjamin E. Diokno, who previously said in a television interview that there “could be one percentage point every quarter for the next four quarters.”
Even as the peso declined in the afternoon session, another trader said the peso strengthened in the morning session following the “dovish” remarks from the US Federal Reserve.
The US central bank said there will be no interest rate hikes this year amid an economic slowdown, a departure from its previous pronouncements as recent as September 2018 that it will raise benchmark rates thrice this year.
“The peso started stronger due to weaker dollar overnight over Fed’s decision. It quickly bounced back as it traded mostly between P52.82 and P52.87, still on speculation of a dovish BSP,” another trader said.
The second trader expects peso to strengthen to P52.55-P52.80 versus the dollar today as there might be a reversal in market speculation.
“The BSP was not that dovish since there was no mention of the RRR cut. The market was really expecting something today,” the second trader said.
Meanwhile, the first trader expects the peso to move between P52.70 and P52.90. — Karl Angelo N. Vidal