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Peso recovers vs dollar ahead of BSP rate decision

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THE PESO recovered on Thursday as investors reduced their dollar positions ahead of policy tightening by the local central bank.

The local currency closed the session at P54.23 versus the greenback on Thursday, 9.5 centavos stronger than the P54.325-per-dollar finish the previous day.

The peso traded stronger the whole day, opening the session at P54.275 against the US currency. It climbed to as high as P54.19, while its intraday low stood at P54.295 versus the dollar.

Trading volume grew to $727.37 million from the $623.4 million that switched hands on Wednesday.

A foreign exchange trader said the local currency consolidated yesterday.

“It traded within the same range as I think the dollar-peso traded within the P54.20-P54.28 range,” the trader said in a phone interview.

“We were waiting for the BSP’s (Bangko Sentral ng Pilipinas) meeting where they hiked [rates by] 50 basis points.”

The BSP’s policy-setting Monetary Board raised its interest rates by another 50 basis points at yesterday’s review, bringing the overnight borrowing rate to 4.5%.

BSP Deputy Governor Chuchi G. Fonacier said after the market’s close that the 50bp hike is warranted amid persistent signs of sustained and broadening price pressures.

The central bank also revised its inflation forecast for 2018 to 5.2% from 4.9%, and to 4.3% from 3.7% for 2019.

Ruben Carlo O. Asuncion, UnionBank of the Philippines chief economist, said investors most probably took profits ahead of the policy meeting.

“Some may have also taken positions for more strengthening the coming days,” he said via text.

The trader concurred, adding there was not much demand for the dollar as the BSP was expected to tighten its policy settings.

“That is still aggressive…and it seems the BSP is still a bit hawkish. So with that, let’s see if in a way this would support the peso going forward.”

For Friday, the trader said the peso is expected to move between P54.15 and P54.35 versus the dollar, while Mr. Asuncion gave a P53.90-P54.20 range. — K.A.N. Vidal