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Philippines: Peso regains strength, closes at 52.85:$1
MANILA, Philippines — The peso gained 30 centavos yesterday to break the 53 to $1 level, ahead of the much anticipated third rate hike by the Bangko Sentral ng Pilipinas (BSP) on Thursday to curb rising inflationary pressures.
The local currency closed at 52.85 yesterday from Friday’s 53.15, opening stronger at 51.1 and hitting an intraday high of 52.84.
This was the strongest level for the peso since closing at 52.7 last June 8.
Trading volume rose to $892.9 million yesterday from $595.15 million last Friday.
The peso has emerged as the second weakest currency in the world after the Indian rupee. It has depreciated close to seven percent since the start of the year to hit a 12-year low after piercing the 53 to $1 mark.
The dollar, on the other hand, continued to strengthen amid the normalization path taken by the US Federal Reserve, raising benchmark rates twice this year and expects two more rate hikes.
There has been a strong demand for the greenback from Philippine companies to finance the importation of capital equipment and raw materials as part of the country’s growing economy.
Joey Cuyegkeng, senior economist at ING Bank Manila, said the peso has been appreciating after BSP Governor Nestor Espenilla Jr. announced a strong follow-through monetary adjustment on the rate-setting meeting of the Monetary Board of Aug. 9.
“We believe such a strong action is equivalent to a 50 basis point hike which the currency market has priced in,” Cuyegkeng said.
The BSP sees July inflation ranging from 5.1 to 5.8 percent from a five-year high of 5.2 percent in June due to higher utility rates, oil price and fare hikes, higher excise tax on tobacco products, and more expensive food items, particularly rice.
Inflation averaged 4.3 percent in the first six months of the year, exceeding the BSP’s two to four percent target for this year.
The BSP’s Monetary Board has delivered a 50 basis point increase so far this year through back-to-back rate increases. It lifted rates by 25 basis points for the first time in more than three years last May 10, followed by another 25 basis points last June 20 to prevent inflation from spiraling out of control.
Source: https://www.philstar.com/business/2018/08/07/1840211/peso-regains-strength-closes-52851#FzyIpqtmG57VXhzW.99