THE PESO was flattish on Monday as investors stayed on the sidelines, waiting for a bigger response to the economic impact of the coronavirus disease 2019 (COVID-19) and also following the central bank chief’s fresh signals of a “deeper” rate cut.
The local unit finished trading at P50.595 per dollar yesterday, shedding just a centavo from its P50.585 close on Wednesday before the Holy Week break, according to data from the Bankers Association of the Philippines.
The peso opened the session at P50.62 per dollar. Its weakest showing was at P50.65, while its intraday best was at P50.57 against the greenback.
Dollars traded dropped to $194.20 million on Monday from the $521 million seen on Wednesday.
A trader attributed the peso’s steady finish to low market volatility in the absence of market-moving developments.
“Trading volume was low as there was no motivation to trade considering there is no significant international news. Market sentiment kasi is based on any news on COVID-19 and there was nothing significantly new so far,” a trader said in a phone call.
The virus has already sickened more than 1.8 million globally and has killed over 114,000. In the Philippines, COVID-19 patients rose to 4,648 as of Sunday afternoon. Casualties totaled 297, according to the Department of Health.
Meanwhile, another trader said the peso’s finish came after hints from the Bangko Sentral ng Pilipinas (BSP) about a more aggressive policy move amid the crisis.
“The peso slightly weakened amid dovish comments from BSP Governor [Benjamin E.] Diokno over prospects of stronger policy rate cuts and a forthcoming reduction in the reserve requirement ratio (RRR),” the second trader said in an e-mail.
The central bank is looking at a “deeper cut” in interest rates to help cushion the economy from the impact of a “once-in-a-lifetime crisis” caused by the coronavirus disease 2019 (COVID-19) pandemic, Mr. Diokno said on Sunday ahead of a policy meeting next month.
He also signaled another cut in the amount of cash that banks need to hold as reserves to boost liquidity in the financial system.
The policy-setting Monetary Board (MB) has cut rates by a total of 150 basis points (bps) since 2019, almost completely unwinding the 175 bps in hikes it implemented in 2018 amid multi-year high inflation.
Its latest move was 50-bp reduction on March 19, which brought the overnight reverse repurchase rate — or the key policy rate — to 3.25% and overnight lending and deposit rates to 3.75% and 2.75%, respectively, in a bid to shield the economy from the virus’ fallout.
The MB will meet to discuss policy anew on May 21.
The central bank chief added that they will cut lenders’ RRR by another 200 bps following a reduction of the same magnitude in universal and commercial banks’ reserve ratio earlier this month as they seek to boost liquidity to support economic activity.
The MB last month authorized Mr. Diokno to cut RRR by a maximum of 400 bps for the year, with potential cuts in the reserve requirements for other banks and nonbank financial institutions also to be explored.
Mr. Diokno earlier said the 200-bp cut freed up some P180-200 billion in liquidity.
The first trader expects the peso to move around the P50.40 to P50.80 band versus the dollar today, while the second trader gave a forecast range of P50.55 to P50.75. — L.W.T. Noble