Peso strengthens on BoP surplus
THE PESO continued to strengthen versus the greenback on risk-on sentiment amid the wider balance of payments (BoP) surplus in May and dovish signals from the US Federal Reserve.
The local unit closed at P49.73 against the dollar on Thursday, stronger by nine centavos from its P49.82 finish on Wednesday, data from the Bankers Association of the Philippines showed.
The peso opened Thursday’s session at P49.77 per dollar. Its intraday low was at P49.82 while its strongest showing was its close of P49.73 against the greenback.
Dollars traded went down to $615.66 million on Thursday from the $681.45 million on Wednesday.
The peso’s strength was supported by the wider BoP surplus as well as improved manufacturing data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.
“The peso exchange closed at its strongest since June 14 when it closed at P49.505 after wider BoP surplus data and improved global market risk after improvements in manufacturing data for most countries,” he said in a text message.
Bangko Sentral ng Pilipinas data showed BoP stood at a surplus of $2.431 billion in May, wider than the $928-million surfeit seen a year ago as well as the $1.666-billion surplus logged in April.
The May surplus is also the highest since January 2019’s $2.704-billion surfeit.
Meanwhile, a trader attributed the peso’s climb to dovish signals from the US Fed.
“The peso strengthened after the latest Fed minutes signalled that US monetary policy will likely remain highly accommodative for several years,” a trader said in an e-mail.
Reuters reported that minutes from the Fed’s June 9-10 meeting showed policy makers “generally indicated support” for tying rate-setting policy to economic outcomes.
The minutes also noted officials are seeing an economic downturn in the US which is the worst since World War 2. With this, they expressed no intent to let up on providing stimulus for the foreseeable future.
For today, Mr. Ricafort gave a forecast range of P49.60 to P49.85 while the trader expects the peso to move around the P49.60 to P49.80 levels versus the dollar. — L.W.T. Noble with Reuters
