THE PESO rose further against the greenback on Wednesday, notching its strongest finish since January 2018 amid positive market sentiment on the government’s move to scale up its fiscal stimulus during the pandemic.
The local unit finished trading at P50.26 against the greenback on Wednesday, gaining five centavos from its P50.31 per dollar, according to data from the Bankers Association of the Philippines.
The peso opened the session at P50.32 against the dollar which was also its weakest showing for the day. Meanwhile, its intraday best was its close of P50.26.
Dollars traded slipped to $390.5 million on Wednesday from the $391.85 million logged on Tuesday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso’s close was its strongest in more than two years or since the P50.15-per-dollar finish last Jan. 8, 2018.
He said the peso rose on the back of new assumptions from the Development Budget Coordination Committee (DBCC) that include increased spending to cushion the impact of the virus outbreak on the economy.
“The peso closed stronger after the latest DBCC estimates showing higher budget deficit estimate of 8.1% that will increase stimulus spending to offset economic losses due to COVID-19 (coronavirus disease 2019) and the lockdown,” Mr. Ricafort said in a text message.
On Wednesday, the DBCC announced a revised projection of a 2-4% contraction in gross domestic product (GDP) this year, worse than the flat growth to -1% estimate from economic managers in April. This will follow the six percent growth notched in 2019.
Before the pandemic, the DBCC’s GDP growth target for this year and for 2021 was at 6.5% to 7.5%.
The DBCC expects recovery in 2021, expecting growth of 7.1% to 8.1%.
Meanwhile, a trader attributed the peso’s gains to US inflation data.
“The peso strengthened following the release of weaker-than-expected US inflation reports overnight,” the trader said in an e-mail.
For today, Mr. Ricafort gave a forecast range of P50.15 to P50.40 per dollar while the trader expects the peso to move within the P50.20 to P50.40 band. — L.W.T. Noble