Peso climbs on local data, US central bank decision

peso climbs on local data us central bank decision - Peso climbs on local data, US central bank decision

THE PESO strengthened against the dollar on Monday after the country’s current account deficit narrowed in the second quarter and the US Federal Reserve last week said it would keep rates near zero.

The local unit closed at P48.365 versus the dollar on Monday, three centavos higher than the P48.395 finish last Friday, data from the Bankers Association of the Philippines showed.

The peso started Monday’s session at P48.38 per dollar. It logged a low of P48.39 during the session while its intraday peak stood at P48.35 against the greenback.

Dollars traded sank to $662.83 million on Monday from Friday’s $832.54 million.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso was stronger following the Bangko Sentral ng Pilipinas’ (BSP) release of data on the country’s current account.

“The peso continued to strengthen versus the dollar for the second straight trading day after stronger-than-expected current account data despite the coronavirus pandemic. This is largely reflecting the year-on-year decline in imports that resulted in lower demand for dollars to pay for imports,” Mr. Ricafort said in a text message yesterday.

The country’s current account swung to a $4.4-billion surplus last quarter from a year earlier after the trade in goods deficit narrowed amid the coronavirus disease 2019 pandemic.

The surplus was a turnaround from the $931-million deficit in the second quarter of 2019 and higher than the $92-million surplus in the first quarter, data released by the BSP on Friday showed.

The central bank said the surplus was mainly driven by disruptions in the supply chain for imports and exports due to coronavirus restrictions.

The country’s current account includes transactions for trade in goods and services, investments and fund transfers.

Meanwhile, a trader said the peso appreciated as the US Federal Reserve kept policy rates steady last week.

The Fed on Wednesday vowed to keep interest rates near zero until inflation is on track to overshoot the US central bank’s 2% target, a bold new promise aimed at bringing millions of out-of-work Americans back to the labor market, Reuters reported.

But the new guidance also marked the start of a vigorous monetary policy debate as the Fed shifts from a crisis-era focus on keeping markets afloat during the coronavirus pandemic to managing what it now sees as a steady, multi-year recovery.

For today, Mr. Ricafort expects the peso to range from P48.30 to P48.95 per dollar while the trader sees the local unit moving from P48.15 to P48.65. — K.K.T. Jose with Reuters

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