Atin Ito First Filipino Community Newspaper in Ontario
MANILA, Philippines — The peso rebounded strongly yesterday, briefly bouncing back to the 55 to $1 level, as currencies in the region strengthened against the greenback on bets the US Federal Reserve would soon end its tightening cycle after leaving interest rates untouched the other day.
The local currency gained 63 centavos to close at 56.1 to a dollar from 56.73 last Tuesday. It opened stronger at an intra-day low of 56.6 and rallied to an intra-day high of 55.93, but lost steam toward the end of the trading session.
Volume more than doubled to $1.84 billion from Tuesday’s $860.9 million as there were no trading sessions last Nov. 1 and 2.
After almost touching the 57 to $1 handle several times last September, the peso has been trading within the 56 to $1 level as the Bangko Sentral ng Pilipinas (BSP) has been actively intervening in the foreign exchange market to smoothen the volatility.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., also attributed the 1.1 percent appreciation of the peso in the past three trading days to the expected increase in remittances from overseas Filipino workers (OFWs) to finance some holiday-related spending especially for the rest of this long holiday weekend for many people.
He also cited the recent decline in global crude oil prices to among three-month lows and erased all the increase since the Israel-Hamas war started on Oct. 7, as this could help reduce the country’s oil import bill and help narrow the country’s trade deficit.
Ricafort said the peso exchange rate could range at 56 to 56.20 on Monday and trade within the 55.85 to 56.35 range next week.
Meanwhile, the dollar eased and was on course for a weekly decline against a basket of currencies as traders wagered that the US Federal Reserve was most likely done with rate increases, lifting risk sentiment.
Markets are now pricing in less than a 20 percent chance of a rate increase in December compared with 39 percent earlier, CME FedWatch tool showed, in the wake of the US central bank’s holding interest rates steady on Wednesday. The Fed, however, left the door open to a further increase in borrowing costs in a nod to the economy’s resilience.
“Fed is now walking a tightrope between financial conditions and rate hikes,” said Moh Siong Sim, currency strategist at Bank of Singapore, noting that the Fed said rising bond yields are doing some work for it and it can afford to wait and see.
“There’s still this underlying tension here that could be a worry but for now market has become more relaxed.”
Christopher Wong, currency strategist at OCBC, said a more entrenched disinflationary trend, and a material easing of US labor market tightness and activity data are needed for the dollar to trade softer.
But for now, Wong said, the dollar still retains a “significant yield advantage and is a safe haven proxy to some extent.” — Lawrence Agcaoili
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Credit belongs to: www.philstar.com
