Peso gains after progress in US-China talks
THE peso strengthened Friday after risk-on sentiment returned after positive developments on the US-China trade negotiations as well as signals from the central bank of a pause in monetary easing.
The peso finished trading at P50.42 to the dollar on Friday, against its Thursday close of P50.56, according to data from the Bankers Association of the Philippines.
On April 30, the peso closed at P50.40.
The opening level for the curency was P50.50, with the low at P50.51 and the high P50.41.
Dollar volume slipped to $433.2 million from $558.39 million Thursday.
A trader said positive sentiment from the US-China trade negotiations helped the peso finish stronger.
“The peso appreciated after the US and China mutually agreed on the implementing guidelines of their trade agreement earlier this year,” he said in an e-mail.
Reuters reported that key US and Chinese trade officials spoke by telephone Friday and agreed to improve the atmosphere for Phase 1 of the trade deal implementation.
Under the deal, China agreed to expand its purchases of US goods from a 2017 baseline by $200 billion over two years, with about $77 billion in increased purchases in the first year and $123 billion in the second year.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso was also boosted by recent signals of a pause in easing from the central bank.
“BSP (Bangko Sentral ng Pilipinas) Governor (Benjamin E. Diokno) signalled a possible pause in policy rate cuts,” Mr. Ricafort said in a text message.
Mr. Diokno said Thursday that the 125 basis-point (bps) worth of rate cuts this year are “appropriate to provide support to the economy and boost market confidence” given the manageable inflation environment and stable inflation expectations during the pandemic.
The cuts this year came through a 25-bp reduction in February followed by two 50-bp cuts in March and April. This has lowered the overnight reverse repurchase facility to 2.75% while lending and deposit rates fell to 3.25% and 2.25%. — Luz Wendy T. Noble
