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THE PESO weakened against the dollar on Thursday on expectations that the central bank will keep benchmark interest rates intact at historic lows.
The local currency was down 0.7 cent on Thursday to close at P48.045 against the dollar from the bottom of P48.038 on Wednesday, data from the Philippine Bankers Association showed.
The peso’s weakest performance for the day was 48,049. It opened Thursday’s session at P48.04 against the dollar and rose to P48.023 against the dollar.
The dollars that changed hands fell to $ 727.5 million on Thursday from $ 897.5 million the day before.
Week over week, the local unit still gained 2.5 cents from its close of P48.07 per dollar on February 5. The market closes on Friday, February 12, in observance of the Chinese New Year.
“The peso was slightly weaker, but overall changed little against the US dollar for most of the day amid market expectations that the local policy rate would remain unchanged at a record low of 2% amid higher recent inflation, thus effectively reducing the chances of further cuts and could even lead to a potential increase if there were second-round inflationary effects, ”said Rizal Commercial Banking Corp. chief economist Michael L. Ricafort via Viber .
In a statement issued after the market closed, Bangko Sentral ng Pilipinas (BSP) said its Monetary Board kept the key policy rate at 2% during its first policy meeting this year. Rates on overnight loans and deposits also remained intact at 2.5% and 1.5%, respectively.
This coincided with the expectations of 17 of the 18 analysts surveyed by Business world In the past week.
Meanwhile, the BSP raised its inflation forecast for this year to 4% from 3.2% due to expectations that prices will remain high in the coming months. This will reach the upper end of the central bank’s 2-4% annual target.
A trader shared the same opinion and said by email: “The peso weakened after the member of the Monetary Board [Felipe M.] Medal ruled out the possibility of any rate hike and some caution before the BSP policy meeting.
Medalla said Tuesday that a rate hike “is not in the picture” as the central bank still has enough room to maintain an accommodative stance.
Ricafort added that weak investment data also weighed on the peso.
Preliminary data from the BSP released Wednesday night showed that net inflows of foreign direct investment fell 16.5% year-on-year to $ 537 million in November amid the coronavirus pandemic.
This brought the 11-month total to $ 5.792 billion, 10.8% less than the $ 6.493 billion a year ago.
“The healthy downward correction / profit-taking in the local stock market today, at -1.3%, after rising for 5 consecutive days weighed in part on the peso, amid some slight declines in the markets. of American securities, ”he said Thursday. – BM Laforga
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