Peso may rise on remittances, BSP review

THE PESO is seen to extend its climb versus the greenback this week on expectations of robust remittance inflows and a continued accommodative stance from the central bank.

The local unit finished trading at P49.85 per dollar on Friday, gaining 31.5 centavos from its P50.165 close on Thursday, based on data from the Bankers Association of the Philippines.

The currency also appreciated by 48 centavos compared with its close of P50.33 per dollar a week earlier.

The peso’s close on Friday was its strongest in nearly two months or since it ended at P49.79 per dollar on Sept. 15, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The increase in the country’s foreign exchange buffers caused bullish sentiment and supported the peso, he said.

The Bangko Sentral ng Pilipinas (BSP) on Friday reported that gross international reserves as of end-October increased month on month by 1.3% to $107.946 billion. It likewise gained by 4% from the $103.802 billion a year earlier.

At this level, the dollar buffers are enough to cover 7.8 times the country’s short-term external debt based on original maturity and 5.4 times based on residual maturity. It is also equivalent to 10.8 months’ worth of imports of goods and payments of services and primary income.

Another major lead last week was the stronger-than-expected economic growth in the previous quarter, a trader said.

The country’s gross domestic product rose by 7.1% year on year in the July to September period, turning around from the 11.6% decline a year earlier but slower than the 12% annual expansion in the second quarter due to the strict lockdown in August amid a surge in cases.

The trader said the market will monitor the upcoming remittance data this week. The BSP is scheduled to release September remittance data on Monday.

In August, cash remittances rose annually for the seventh straight month by 5.1% to $2.609 billion. This brought inflows for the first eight months to $20.38 billion, up by 5.7% from the same period of 2020.

Meanwhile, Mr. Ricafort said investors will also be monitoring the BSP’s monetary policy meeting on Thursday.

All 20 analysts polled by BusinessWorld last week expect the Monetary Board to keep interest rates unchanged at its policy review on Thursday. Economists said the BSP will keep its policy support as there is still not enough evidence that economic recovery is already self-sustaining.

BSP Governor Benjamin E. Diokno in October said there appears to be no need to adjust policy settings at least until the end of 2021 and stressed prematurely hiking interest rates could harm economic recovery. He said the elevated inflation seen currently is driven by low supply and is better addressed by non-monetary measures.

For this week, Mr. Ricafort gave a forecast range of P49.50 to 50.10 per dollar, while the trader expects the local unit to move within P49.65 to P50. — Luz Wendy T. Noble