THE PESO inched higher on Wednesday as investors expect positive local gross international reserves (GIR) data and a dovish tone from the US Federal Reserve’s policy review.
The local unit closed at P48.385 versus the dollar on Wednesday, up by 1.5 centavos from its P48.40 finish on Tuesday, data from the Bankers Association of the Philippines showed.
The peso opened Wednesday’s session at P48.43 per dollar. It climbed to as high as P48.35, while its weakest showing for the day was at P48.45 against the greenback.
Dollars traded dropped to $631.95 million on Wednesday from $884.3 million on Tuesday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message that the peso went up as the markets expected the country’s reserve to have gone up in August following the release of data showing higher remittances in July.
“The peso appreciated as the markets anticipate the latest GIR data to new record highs after the release of the stronger-than-expected remittances data on Tuesday,” Mr. Ricafort said.
Money sent home by overseas Filipino workers stood at a seven-month high in July, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday. Cash remittances coursed through banks rose 7.8% year on year in July to $2.783 billion. This was the biggest monthly inflow since the $2.902 billion logged in December.
Meanwhile, the country’s dollar reserves stood at $98 billion at end-July, higher by 15% from the year-ago level and by 4.8% from its May standing. This is already more than the central bank’s $90-billion projection for this year.
The central bank was set to release August GIR data yesterday.
Meanwhile, a trader said the peso strengthened further against the dollar as the market expected the US Federal Reserve to keep its interest rates at near zero while it allows inflation to rise above 2% this year.
“The peso strengthened due to profit-taking ahead of likely dovish guidance from the Federal Reserve policy decision,” the trader said in an e-mail.
The Federal Reserve is expected to wrap up its latest policy meeting on Wednesday with somewhat rosier economic forecasts but a renewed pledge to keep interest rates low for as long as the world’s biggest economy needs to recover from its deepest downturn in decades, Reuters reported.
The two-day meeting is the US central bank’s first under a newly adopted framework that promises to shoot for inflation above 2% to make up for periods, such as now, where it is running below that target. The strategy means the Fed will not take its foot off the monetary gas pedal even if unemployment continues to drop at a faster-than-expected pace.
Fed officials don’t appear ready to translate that framework into an explicit promise to keep the central bank’s key overnight lending rate in its current range of 0% to 0.25% until certain economic benchmarks — say, 2.5% inflation — are met.
The rate-setting Federal Open Market Committee is scheduled to release its policy statement and a summary of fresh economic projections at 2 p.m. EDT (1800 GMT). Fed Chair Jerome Powell is due to hold a virtual news briefing half an hour later.
For today, Mr. Ricafort sees the peso ranging from P48.30 to P48.45 versus the dollar while the trader expects the local currency to move from P48.30 to P48.50. — K.K.T. Jose with Reuters
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