THE PESO strengthened further against the dollar on Thursday to hit a fresh two-month high, as risk appetite improved following the dovish statement of the US Federal Reserve.

The peso closed Thursday’s session at P51.645 versus the greenback, 24.5 centavos stronger than the P51.89-per-dollar finish recorded on Wednesday.

This was the peso’s best showing in more than two months or since it closed at P51.64 against the dollar last April 15.

The peso traded stronger the whole day, opening the session at P51.75 per dollar. It dropped to a low of P51.78 against the greenback, while its intraday high was its closing rate.

Trading volume dropped to $829.16 million from the $902.45 million that changed hands the previous session.

Traders attributed the peso’s continued strength to dovish remarks from the US central bank.

As expected, the Fed kept its policy unchanged during its June 18-19 meeting. However, it dropped its “patient” rhetoric on policy, saying it would “act as appropriate” to keep the economy growing amid trade tensions abroad and global growth slowdown.

Interest-rate futures surged in response to the dovish remarks, and traders are now betting heavily on three rate cuts by the end of the year. US stocks also turned higher.

“The peso appreciated following the remarkably dovish cues from the US Federal Reserve rate decision earlier today despite keeping policy rates steady,” a trader said in an e-mail on Thursday.

Another trader said the dovish statement of the Fed increased risk appetite in the market, prompting investors to gamble on emerging market currencies like the peso.

“We’re seeing the dollar-peso going very low, since the market was expecting a 25-basis-point cut by the Bangko Sentral ng Pilipinas (BSP), but the central bank kept its rate unchanged,” the trader added.

The BSP also kept its benchmark policy rates unchanged at its meeting yesterday. BSP Governor Benjamin E. Diokno said the pause in monetary policy easing will allow them to assess the impact of its previous adjustments, including the cuts in banks’ reserve requirement ratios.

The BSP also trimmed its full-year inflation forecast to 2.7% from the 2.9% projected last May, driven by the expectations of lower oil prices in the global market as well as the appreciation of the local unit versus the dollar.

“The local currency might continue to appreciate after the Philippine central bank held its policy rates today,” the first trader said on Thursday.

For today, the first reader expects the peso to move between P51.50 and P51.80 versus the dollar, while the other gave a P51.35-P51.75 range. — Karl Angelo N. Vidal with Reuters

RELATED ARTICLESMORE FROM AUTHOR