THE PESO closed stronger against the dollar on Tuesday following the signing of the government’s tax reform bill into law.
The local currency closed the session at P50.39 versus the greenback yesterday, gaining nine centavos from the P50.48-per-dollar finish seen on Monday.
The peso opened the session stronger at P50.43 against the greenback. Its lowest point for the session was registered at P50.53, while it reached an intraday high of P50.38 versus the dollar, just a centavo above yesterday’s close.
Dollars traded soared to $604.7 million from the $467.15 million that changed hands in the previous session.
Two traders attributed the peso’s ascent to the enactment of the government’s first tax reform package yesterday afternoon.
“The peso appreciated today after the President’s ratification of the local tax reform bill,” a trader said in an e-mail on Tuesday.
On Tuesday, President Rodrigo R. Duterte signed the Tax Reform for Acceleration and Inclusion (TRAIN) bill into law, which is expected to add P130 billion to the government’s coffers while reducing tax rates of lower income earners.
In the first of the five tax reform packages, workers with an annual salary of P250,000 and below will be exempted from paying income tax, receiving bigger take-home pays.
However, commodities such as fuel, tobacco, sweetened beverages and automobiles will have heftier taxes.
The revenues generated from the tax adjustment will help fund the government’s infrastructure push and social services.
Meanwhile, UnionBank of the Philippines Chief Economist Ruben Carlo O. Asuncion also noted the higher forecast of Philippine economic growth for 2018 given by HSBC Ltd.
“[Aside from the TRAIN bill,] HSBC has actually raised their forecast of Philippine growth for 2018,” Mr. Asuncion said over the phone.
In its quarterly report, HSBC raised its growth forecasts for the Philippines for this year and the next to 6.7%, higher than the 6.5% the global lender previously projected.
This is in line with the updated projection given by the World Bank last week, which also sees the country’s gross domestic product growing 6.7% for 2017 and 2018.
For today, two traders see the peso moving from P50.30 to P50.55, with one saying the local unit may land at the lower end of the range as its climb might be tempered by the positive developments in the American tax reform bill.
“Peso is seen to slightly depreciate [today] amid increasing bets by local traders that the US tax reform bill will get [President Donald J.] Trump’s signature within the week,” a trader said.
Most emerging Asian currencies crawled higher on Tuesday, with the dollar holding steady ahead of a congressional vote on US tax cuts, while the Thai baht softened on expectations interest rates would be kept near record lows.
The dollar index, which tracks the US currency against a basket of six major rivals, was flat at 93.699, as some traders questioned the overall impact of the tax overhaul on the US economy.
Global markets have been buffeted in recent weeks by shifting expectations about Mr. Trump’s ability to push through his signature policy. — Karl Angelo N. Vidal with Reuters