THE PESO appreciated against the greenback on Wednesday before the Holy Week break on the back of positive sentiment due to the central bank’s move to boost liquidity and amid lower coronavirus disease 2019 (COVID-19) infections in some countries.

The local unit ended trading at P50.585 per dollar on Wednesday, rising by 9.5 centavos from its P50.68 close on Tuesday, according to data from the Bankers Association of the Philippines.

The peso was also stronger by 29.5 centavos versus its P50.88 close last Wednesday and by 13.5 centavos from its Friday finish of P50.72 per dollar.

The currency opened Wednesday’s session at P50.60 per dollar. Its weakest showing was at P50.695 while its strongest was at P50.58 against the greenback.

Dollars traded increased to $521 million from $455.9 million on Tuesday.

A trader said the peso’s strength continued its recent trend of appreciation on the back of the Bangko Sentral ng Pilipinas’ (BSP) announcement of a cut in the minimum liquidity ratio for smaller banks.

“The strengthening was more of a continuation of the trend of peso’s strength. A little bit of risk on for us because there was a recent announcement for liquidity ratio cut for thrift banks so it’s a bit of easing so it’s a positive for peso,” the trader said in a phone call.

The BSP slashed the minimum liquidity ratio (MLR) requirement for smaller lenders to 16% from 20% until end-2020 to boost the war chests of thrift, rural and cooperative banks amid the extended lockdown in Luzon.

“The BSP recognizes that the COVID-19 outbreak and community quarantine implemented to combat the spread of the disease has elevated the liquidity risk exposures of banks arising primarily from higher demand for funds by depositors, borrowers or both,” BSP Governor Benjamin E. Diokno said in a memorandum dated April 7.

Earlier, the central bank cut universal and commercial banks’ reserve requirement ratio by 200 basis points to 12% effective on April 3.

Meanwhile, another trader attributed the peso’s gains to global optimism amid what seemed like a plateau in the number of infections in some virus hotspots, as well as some profit taking before the two-day break.

“The peso appreciated from prevailing market optimism that coronavirus-related cases are already plateauing in major global hotspots. There was also some cautious profit taking ahead of possible coronavirus developments during the Holy Week break,” the second trader said in an e-mail. — LWTN

RELATED ARTICLESMORE FROM AUTHOR