Peso jumps to one-month high as stocks rebound

The peso continued to rally against the dollar on Wednesday, hitting a one-month high, supported by the Philippine stock market’s climb amid improving risk sentiment and hawkish signals from the central bank.

The currency surged by 20.4 centavos to close at PHP 61.41 versus the greenback from its PHP 61.614 finish on Tuesday, based on data from the Bankers Association of the Philippines’ website.

This was its best close in almost a month or since it finished at PHP 61.36 a dollar on June 30.

The local unit opened Wednesday’s session slightly weaker at PHP 61.65 per dollar, which was already its worst showing. Meanwhile, it climbed to a high of PHP 61.35 against the greenback.

Dollars exchanged jumped to USD 1.618 billion from USD 1.16 billion previously.

“The dollar-peso closed lower despite the rise in oil prices, dragged by the local equities market, which was strong throughout the day,” a trader said in a phone interview.

The Philippine Stock Exchange index (PSEi) climbed by 0.77% or 49.01 points to close at 6,353.04 on Wednesday, while the broader all shares index increased by 0.59% or 20.30 points to end at 3,447.34.

The PSEi tested the 6,400 level intraday, hitting a peak of 6,436.11, but profit taking kicked in to trim gains before the closing bell.

The peso was also supported by signals of foreign exchange intervention and hawkish policy from the Bangko Sentral ng Pilipinas (BSP) chief, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

BSP Governor Eli M. Remolona, Jr. said on Tuesday that they could consider a larger 50-basis-point (bp) move amid lingering inflation risks, but the chance of this happening is small. The Monetary Board last month increased benchmark borrowing costs by 25 bps for a second straight meeting to bring the target reverse repurchase rate to 4.75%.

Mr. Remolona also said that the BSP intervened minimally during the peso’s latest slide to smoothen volatility, but added that trying to defend the currency against a strong dollar is futile as this would only lead to lower reserves.

For Thursday, the trader said the peso could move between PHP 61.20 and PHP 61.60 per dollar as the market awaits the US Federal Reserve’s policy decision, while Mr. Ricafort sees it ranging from PHP 61.25 to PHP 61.55. — Aaron Michael C. Sy