THE PESO strengthened against the greenback on Monday on the back of lower oil prices, which could mean slower inflation expectations.
The local unit finished trading at P50.58 against the dollar yesterday, appreciating by six centavos from its P50.64 close on Friday, according to data published on the website of the Bankers Association of the Philippines.
The peso opened the session at P50.63 per dollar. Its weakest showing was at P50.715, while its intraday best was at P50.54 versus the greenback.
Dollars traded dropped to $771.1 million on Monday from $1.389 billion on Friday.
A trader attributed the peso’s resilience to a sharp decrease in oil prices.
“Major factor is the falling oil prices…since the Philippines is an oil importing country… It will also lower inflation expectations,” the trader said in a phone call.
Reuters reported that oil prices sank by 30% after Saudi Arabia slashed its selling price in a bid to start a price war with Russia amid falling demand in the market on the back of the coronavirus disease 2019 (COVID-19) outbreak.
Saudi Arabia, the world’s biggest oil exporter, is looking to punish Russia, the world’s second-largest producer, for balking on Friday at production cuts proposed by the Organization of the Petroleum Exporting Countries (OPEC).
This caused Brent crude futures to decrease by 31.5% or by $14.25 to $31.02 a barrel, the biggest drop since the start of the first Gulf War and the lowest price recorded since 2016.
Meanwhile, US West Texas Intermediate crude shed as much as 27.4% or $11.28 to $30 a barrel, also the biggest slip since the first Gulf War and also the cheapest price since 2016.
Aside from lower oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said lower yields on US benchmark bonds also boosted the peso.
“The peso was stronger today after global crude oil prices sharply declined by more than 30% to the lowest in more than four years,” Mr. Ricafort said in a text message on Monday.
“Dramatic decline in key US bond yield benchmarks also supported sentiment on the peso exchange rate…,” he added.
On Monday, the yield on the 10-year US Treasuries succumbed to new record lows and logged its biggest one-day fall in more than a decade due to market fears caused by the virus, leading investors to prefer safe-haven bonds.
The 10-year US Treasury yield fell to as low as 0.318%. It was last down almost 30 basis points (bps) on the day and was set for its biggest daily fall since 2009.
Meanwhile, 30-year US Treasuries were last down 26 bps on the day to its new record low of 0.7%.
For today, the trader expects the peso to move around the P50.40-50.70 levels, while Mr. Ricafort gave a forecast range of P50.45 to P50.75 for the peso-dollar rate. — L.W.T. Noble with Reuters