THE peso strengthened against the dollar on Friday after remarks from the central bank were taken to mean it is planning another interest rate hike during its next monetary policy meeting.
The peso ended the session at P53.51 against the dollar, two centavos stronger compared with the Thursday close.
The peso opened the session weaker at P53.54, before hitting a high of P53.47 intraday. Its low was P53.55 to the dollar.
Dollars traded increased to $474.05 million from the $334.7 million that switched hands the previous day.
A trader said that the peso was confined to a tight range on Friday.
“The dollar-peso, just like for the past few days, has remained the same. It traded within a very tight range,” the trader said in a phone interview.
“For the past few days, we’re seeing a little bit of pressure for the dollar to move [stronger] against the major currencies. The peso is tracking that move.”
Another trader said the peso appreciated due to hawkish cues from the Bangko Sentral ng Pilipinas “suggesting a possible August rate hike.”
In a speech, BSP Governor Nestor A. Espenilla, Jr. said the monetary authority is “considering” a hike in benchmark rates to temper inflation expectations.
“Let me say that the BSP is considering strong follow-through monetary adjustment at the next meeting of the Monetary Board in August,” Mr. Espenilla said.
The BSP added that it will take into consideration the potential price pressures arising from excessive volatility in the foreign exchange market.
“While we believe that our fundamentals remain solid and healthy, sustained pressures on the peso could adversely affect inflation expectations,” Mr. Espenilla added.
“We heard that the BSP might be aggressive in trying to quell inflation expectations. They might hike 25 basis points or even 50 basis points if they are more aggressive,” the first trader said.
“Having said that, the market is starting to factor in a 25-basis-point hike.”
Last month, headline inflation accelerated to a five-year high of 5.2%, against 4.6% in May. — Karl Angelo N. Vidal