Peso declines vs dollar as oil prices inch higher

THE PESO retreated against the greenback on Wednesday as oil prices edged higher and as the market was waiting for the US Federal Reserve’s policy decision.

The local unit closed at P48.477 per dollar, depreciating by 9.6 centavos from its P48.381 finish on Tuesday, based on data from the Bankers Association of the Philippines.

The peso opened Wednesday’s session at P48.44 against the dollar. Its weakest showing was at P48.485, while its intraday best was at P48.40 versus the greenback.

Dollars exchanged increased to $854.98 million yesterday from $643.5 million on Tuesday.

The peso weakened versus the dollar due to gains in global oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Oil rebounded as optimism ahead of a meeting of producer group OPEC+ to discuss output policy offset concern that India’s coronavirus crisis could dent a recovery in fuel demand, Reuters reported.

US crude futures settled at $62.94 per barrel, up $1.03 or 1.66%. Brent crude futures settled at $66.42 per barrel, up 77 cents or 1.17%.

OPEC+, which is responsible for more than a third of global production, has cut output by around 8 million barrels per day (bpd), equivalent to over 8% of global demand. The reduction includes a 1 million bpd voluntary cut by Saudi Arabia.

At the April 1 meeting, the group agreed to bring 2.1 million bpd back to the market from May to July, easing cuts to 5.8 million bpd.

In a report by OPEC+ experts, the group forecast global oil demand in 2021 would grow by 6 million bpd, after falling 9.5 million bpd last year.

The OPEC+ report said it expected commercial oil stocks to reach 2.95 billion barrels in July, taking them below the 2015-2019 average, and expected them to remain below that average for the rest of the year.

Meanwhile, a trader attributed the peso’s depreciation versus the dollar on Wednesday to market caution ahead of the policy decision of the Federal Reserve.

The Federal Open Market Committee held its third policy review for the year from Tuesday to Wednesday and was expected to announce its decision after local financial markets closed.

Fed Chairman Jerome Powell earlier said the US central bank will continue to push policies that will support their mandate of maximum employment and stable prices.

For Thursday, Mr. Ricafort expects the peso to move within the P48.42 to P48.52 levels versus the dollar, while the trader gave a forecast range of P48.35 to P48.55. — LWTN with Reuters