Peso may climb on Fed minutes


THE PESO may continue to strengthen against the dollar this week ahead of the release of the minutes of the US Federal Reserve’s November meeting, which could provide hints on its next move.

The local unit closed at P57.26 on Friday, appreciating by 10 centavos from its P57.36 finish on Thursday, Bankers Association of the Philippines data showed.

However, week on week, the local unit was down by three centavos from its P57.23 close on Nov. 11.

The peso opened Friday’s trading session at P57.44 per dollar. Its weakest showing was at P57.45, while its intraday best was at P57.23 against the greenback.

Dollars exchanged decreased to $650.18 million on Friday from $661.88 million on Thursday.

The peso strengthened on Friday after the release of the latest balance of payments (BoP) data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The country recorded a $711-million BoP surplus last month, the Bangko Sentral ng Pilipinas (BSP) reported on Friday. This was lower than the $1.1-billion surplus seen in the same month last year but was an improvement from the $2.34-billion deficit logged in September. 

This was also the country’s biggest BoP surplus in seven months or since the $754 million in March and was the first time it posted a surfeit since April.

“The dollar/peso exchange rate also eased after the recent decline in global commodity prices, especially as crude oil prices at new 1.5-month lows and also near 10-month lows that could help reduce the country’s import bills/trade deficit, going forward,” Mr. Ricafort said.

Brent crude settled at $87.62 a barrel, falling $2.16 or 2.4%. US West Texas Intermediate (WTI) crude settled at $80.08 a barrel, losing $1.56, or 1.9%. Both posted weekly losses, with Brent down around 9% and WTI roughly 10%.

The peso strengthened as lower-than-expected US consumer price index (CPI) resulted in the dollar’s depreciation, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

US CPI rose to 7.7% year on year in October, slower than the 8.2% print in September.

The slower-than-expected inflation print may mean the Fed can begin to scale down its rate hikes as early as its Dec. 13-14 meeting. The Fed has already increased rates by 375 basis points (bps) since March.

For this week, industry players will watch out for the minutes of the Federal Open Market Committee (FOMC) and to look for hints on the US central bank’s next move, Mr. Asuncion said. 

Any hawkish surprise in the FOMC minutes could be mitigated by the BSP’s recent policy tightening, he added.

The BSP last week increased the overnight reverse repurchase rate by 75 bps to 5%, the highest in nearly 14 years. Rates on the overnight deposit and lending facilities were also increased to 4.5% and 5.5%, respectively.

The Monetary Board has so far raised policy rates by 300 bps since May to curb inflation and support the peso.

In an interview with Reuters on Friday, BSP Governor Felipe M. Medalla said the BSP will have to continue raising interest rates if the Fed tightens further next month.

“If the Fed does 50 (bps), we cannot have zero, right? So, the question is whether it’s 25 (bps) or 50 (bps),” Mr. Medalla said, pertaining to both central banks’ policy meetings in December.

For this week, Mr. Ricafort gave a forecast range of P57.10 to P57.50, while Mr. Asuncion expects the local unit to move within a wider range of P56.80 to P57.50 a dollar. — K.B. Ta-asan