Peso rises on BoJ decision, stock market’s gains

THE PESO strengthened against the dollar on Wednesday following the Bank of Japan’s (BoJ) decision to keep rates ultra-low and amid expectations that the Philippines will be among one of the fastest-growing economies in the region this year.

The local unit closed at PHP 54.62 per dollar on Wednesday, appreciating by 20 centavos from Tuesday’s finish of PHP 54.82, according to data from the Bankers Association of the Philippines.

The peso opened Wednesday’s session at PHP 54.80 versus the dollar. Its weakest showing was at PHP 55.01, while its intraday best was at PHP 54.57 against the greenback.

Dollars exchanged rose to USD 1.429 billion on Wednesday from USD 1.373 billion on Tuesday.

The peso climbed after the BoJ kept its monetary policy settings unchanged, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“As a result, the benchmark 10-year US Treasury yield eased anew, now at 3.48%, among one-month lows and near 4-month lows, already lower by a total of -0.86 from the 15-year high of 4.34% posted on Oct. 21, 2023, thereby could help lower borrowing costs for some listed companies and also somewhat reduce the attractiveness of the US currency,” Mr. Ricafort said.

The BoJ on Wednesday maintained ultra-low interest rates, including a bond yield cap it was struggling to defend, defying market expectations it would phase out its massive stimulus program in the wake of rising inflationary pressure, Reuters reported.

At a two-day policy meeting, the BoJ kept intact its yield curve control targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote.

The central bank also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target.

The peso also strengthened as the local stock market posted gains, Mr. Ricafort added.

The benchmark Philippine Stock Exchange index gained by 80.82 points or 1.15% to close at 7,094.86 on Wednesday, while the broader all-shares index closed higher by 34.59 points or 0.94% to finish at 3,692.51.

“The recent gains in the local financial markets, including the peso, also supported by optimism over the country’s economic growth estimates… as the Philippines is expected to be one of the fasting-growing economies in the region for 2023,” Mr. Ricafort said.

The ASEAN+3 Macroeconomic Research Office (AMRO) trimmed its growth outlook for the Philippines this year amid deteriorating global economic conditions.

In its Regional Economic Outlook Update released on Tuesday, the Philippine economy is expected to expand by 6.2% this year, slightly lower than the 6.3% projection given in October.

The AMRO’s 6.2% forecast is within the government’s 6-7% growth target this year, and the second-fastest growth in the region behind Vietnam’s 6.8%.

“The peso appreciated ahead of a potentially weaker US producer inflation report for December 2022 tonight. The local currency might strengthen amid likely higher US initial jobless claims report,” a trader said in an e-mail on Wednesday.

US producer price index , retail sales, and manufacturing output data were set to be released overnight.

For Thursday, the trader sees the peso moving between PHP 54.45 and PHP 54.70 versus the greenback, while Mr. Ricafort gave a forecast range of PHP 54.55 to PHP 54.75. — Keisha B. Ta-asan with Reuters