Peso climbs vs dollar on easing concerns over banking sector

THE PESO strengthened to an over one-month high against the dollar on Tuesday as banking sector concerns eased and expectations of a dovish move from the Philippine central bank.

The local currency closed at PHP 54.44 versus the dollar on Tuesday, appreciating by 23.50 centavos from Monday’s PHP 54.675 finish, data from the Bankers Association of the Philippines’ website showed.

This is its best finish since February 10, when it closed at PHP 54.42 against the dollar.

The peso traded stronger against the dollar the entire day, opening Tuesday’s session at PHP 54.30 per dollar. It climbed to as high as PHP 54.26, while its worst showing for the day was at just PHP 54.48 versus the greenback.

Dollars traded climbed to USD 1.077 billion on Tuesday from the USD 861.05 million recorded on Monday.

“The peso appreciated mainly due to easing investor concerns on the global financial sector,” a trader said in an e-mail.

The dollar steadied in a holiday-thinned Asia session on Tuesday, though it struggled to lift far from five-week lows as traders reckoned banking stress would keep the US Federal Reserve from hiking rates much further, or at all, later in the week, Reuters reported.

The greenback ticked about 0.1% higher to USD 1.0712 per euro and advanced a bit further on the Australian and New Zealand dollars. It held at 131.24 yen, just above a five-week low at 130.55.

The US dollar index rose by 0.06% to 103.40.

News of UBS’ planned takeover of rival Credit Suisse on Sunday — a shotgun merger engineered by Swiss authorities — gave cause for some relief that the most urgent risks were in hand.

The peso was also supported by dovish comments from Finance Secretary Benjamin E. Diokno, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Bangko Sentral ng Pilipinas may consider a smaller 25-basis-point (bp) rate hike or even pause its tightening cycle at its meeting on Thursday amid heightened global uncertainties, Mr. Diokno, a member of the central bank’s policy-setting Monetary Board, said on Monday.

The Monetary Board raised its benchmark interest rate by 50 bps for a second straight meeting last month, bringing the key rate to 6%.

The BSP has hiked rates by a total of 400 bps since May 2022.

For Wednesday, the trader said the peso could continue its climb against the dollar on expectations of a smaller rate hike from the Fed.

The trader expects the peso to trade between PHP 54.35 and PHP 54.55, while Mr. Ricafort sees it moving from PHP 54.30 to PHP 54.50 per dollar. — AMCS with Reuters