Peso recovers on mixed US housing data

The peso bounced back against the dollar on Wednesday due to mixed US housing and construction data, and after the Bank of Japan kept its policy rate unchanged.

The local unit closed at PHP 55.75 per dollar on Wednesday, strengthening by 20 centavos from PHP 55.95 on Tuesday, based on Bankers Association of the Philippines data.

The peso opened Wednesday’s session at PHP 55.85 against the dollar. Its intraday best was at PHP 55.73, while its weakest showing was at PHP 55.90 versus the greenback.

Dollars exchanged rose to USD 1.59 billion on Wednesday from $1.31 billion on Tuesday.

The peso was supported by mixed US housing and construction data recently, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

US single-family homebuilding surged to more than a 1-1/2-year high in November and could gain further momentum, with declining mortgage rates and incentives from builders likely to draw potential buyers back into the housing market, Reuters reported.

Single-family housing starts, which account for the bulk of homebuilding, jumped 18% to a seasonally adjusted annual rate of 1.143 million units last month, the Commerce Department’s Census Bureau said. That was the highest level since April 2022.

“With these the USD softened, and we saw movement support recovery of the PHP,” Mr. Roces said.

The dollar index inched up 0.13% to 102.25, after sliding more than 0.3% the previous day and touching a four-month low of 101.76 last week, Reuters reported.

“The peso recovered after the Bank of Japan (BoJ) maintained dovish policy guidance and kept its policy rate unchanged at -0.10%,” a trader added in an e-mail.

At the two-day meeting that ended on Tuesday, the BoJ kept its short-term rate target at -0.1% and that for the 10-year government bond yield around 0%. It also left unchanged a pledge to ramp up stimulus “without hesitation” if needed. 

For Thursday, the trader said the peso could depreciate against the dollar ahead of the release of the third quarter US gross domestic product report.

The trader sees the peso moving between PHP 55.65 and PHP 55.90 per dollar on Thursday, while Mr. Roces sees it ranging from PHP 55.50 to PHP 55.80. — Aaron Michael C. Sy with Reuters