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Peso rebounds ahead of BSP meet

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THE PESO posted a slight recovery against the dollar on Friday amid some respite from geopolitical tensions and anticipation for a strong tightening move from the Bangko Sentral ng Pilipinas (BSP) next week.

The local unit closed at P54.04 versus the greenback, slightly stronger than the P54.075 finish on Thursday.

The peso opened at P54.03 to log a marked improvement from the previous day’s rate. It even touched P53.95 as its intraday best, but also hit a low at P54.08 before settling at the closing rate.

Sought for comment, one trader said the peso got a lift from a relatively quiet geopolitical scene compared to a few days ago.

“The peso slightly gained strength today amid lack of geopolitical noise and ahead of likely strong monetary action from the BSP next week,” the trader said.

The dust has settled several days after the United States unleashed a new set of tariffs on $200 billion worth of Chinese goods. Beijing quickly retaliated with fresh duties on about $60 billion worth of American imports.

Reuters reported that the new duties set by the US were at 10% for now before its full implementation by the end of 2018 set at 25%.

On the other hand, market players are looking forward to the BSP’s rate-setting meeting next Thursday, anticipating that the central bank will introduce a fourth consecutive rate hike at a time of skyrocketing prices of goods.

Another trader added that the peso may be “consolidating” at the current range, as the market increasingly expects the BSP to follow through with its signals of a “strong” monetary action. This has been taken as a cue for a hike worth another 50 basis points (bp), matching a similar move in August.

Benchmark yields currently range from 3.5 to 4.5% following a cumulative 100bp hike since May.

BSP Governor Nestor A. Espenilla, Jr. has committed to “take strong immediate action” in response to the faster-than-expected 6.4% inflation rate recorded in August. This pulled the eight-month average increase in prices to 4.8%, well above the 2-4% target band.

The central bank chief has also been vocal about the need to address “excessive volatility” in the currency market and noted that these warrant close monitoring.

Dollars traded on Friday reached $669.9 million, slightly higher than the $606.1 million which exchanged hands during the previous session. — Melissa Luz T. Lopez