Peso strengthens as US stocks post record gains

THE PESO strengthened against the greenback on Thursday after gains in the US stock market.

The local unit finished trading at P49.41 per dollar on Thursday, gaining six centavos from its P49.47 close on Wednesday, data from the Bankers Association of the Philippines showed.

The peso opened Thursday’s session at P49.455 a dollar. Its weakest showing for the day was at P49.50 while its intraday best was at P49.39 against the greenback.

Dollars traded declined to $641.7 million from the $760.73 million seen the previous day.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso climbed on the back of less safe-haven demand amid gains in the US stock market.

“The peso exchange rate closed stronger partly on improved global market risk appetite amid new record highs in the US Nasdaq led by technology shares,” Mr. Ricafort said in a text message.

US stocks rose on Wednesday and the Nasdaq hit a record closing high, supported by technology shares as early signs of an economic rebound offset concern about further lockdowns due to a jump in coronavirus cases across the country, Reuters reported.

The Dow Jones Industrial Average rose 177.1 points or 0.68% to 26,067.28; the S&P 500 gained 24.62 points or 0.78% to 3,169.94; and the Nasdaq Composite added 148.61 points or 1.44% to 10,492.50.

Meanwhile, a trader attributed the stronger peso to grim job market conditions in the US.

“The peso appreciated from the weaker greenback as the US initial jobless claims report might remain elevated,” the trader said. New weekly data will be reported overnight.

Initial jobless claims slipped to 1.43 million in the seven days ended June 27 from the 1.48 million logged the previous week, data from the US Labor department showed, according to a Reuters report.

For today, Mr. Ricafort gave a forecast range of P49.30 to P49.50 per dollar while the trader said the local unit will move within the P49.35 to P49.55 levels.

PESO STRONGEST IN THE REGION
Meanwhile, the peso has remained to be one of the most stable Asian currencies as it maintains its strength against the greenback despite the ongoing coronavirus-induced crisis, the Department of Finance (DoF) said in its latest economic bulletin.

The DoF said on Thursday the peso was ranked first among four currencies in Asia that kept their value against the greenback, based on year-to-date changes as of July 8.

Citing data from Bloomberg, the Finance department said the local unit strengthened by 2.21% against the US dollar from Dec. 31’s P50.66 finish to Wednesday’s close of P49.53 per dollar.

This was the strongest in the group versus the Hong Kong dollar’s 2.07% appreciation during the same period, the Taiwan dollar’s 1.68% and the Japanese yen’s 0.87%, based on the data.

The four units were the only ones that strengthened against the greenback in that period out of 12 Asian currencies.

The 12 countries studied were China, Japan, India, the Philippines, Singapore, Korea, Thailand, Vietnam, Malaysia, Indonesia, Hong Kong and Taiwan.

The Thai baht posted the largest depreciation against the dollar with a 5.1% year-to-date change, followed by the Indian rupee which weakened by 4.97% from the start of the year, Malaysian ringgit’s 4.6% and Singapore dollar’s 3.66% change.

“The peso-dollar exchange rate also remains stable in 2020, its coefficient of variation at 0.73%, ranking third among 12 regional currencies and lower than the 1.86% Asian average,” the statement read.

The DoF attributed the Philippine peso’s strength and stability to the country’s strong balance of payments (BoP) position and increasing gross international reserves (GIR).

“These in turn boosted the confidence in the Philippine peso,” the DoF said

In the first five months of the year, the country’s BoP surplus hit $4.3 billion, narrower than $5.19-billion surfeit a year ago due to slower imports and outward payments given the dampened external demand.

Meanwhile, GIR increased 9.3% from a year ago to $93.3 billion at end-May, already exceeding the central bank’s projection of $90 billion for the year.

“Despite the pandemic and global economic contraction, strong macroeconomic fundamentals support the country’s favorable financial footing,” the DoF said.

“Manageable budget deficits and prompt adjustment of monetary settings in response to current developments help maintain investor confidence,” it added. — LWTN and BML with Reuters