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Friday, March 29, 2024

Peso climbs to 5-month high of 46.03 per dollar

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The peso climbed to a five-month high against the US dollar Wednesday, after the US Federal Reserve signaled it would delay another interest rate hike this year.

The local currency gained 0.7 percent Wednesday to close at 46.03 against the dollar from 46.355 Tuesday. It was the currency’s strongest level since settling at 45.85 against the greenback on Oct. 15, 2015. 

Total volume reached $925.5 million Wednesday, higher than $584.8 million worth of currencies traded a day earlier.

Nicholas Antonio Mapa, a research officer at Bank of the Philippine Islands, said in an e-mail the dollar’s weakness stemmed from the “very dovish comments from [Fed chairman] Janet Yellen last night, indicating that the Fed would be delaying the pace of its rate hike cycle.”

“This forced the dollar to weaken against all currencies, with the peso tracking the regional movement,” Mapa said.

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Yellen said global economic uncertainty, including the slowdown in China and declining oil prices led to the delay of an interest rate hike in both January and  March.

Yellen also said she was expecting “gradual increases” in interest rates in the future.

Mapa said there was a possibility the peso could return to the 45-a-dollar level soon. The last time the peso settled at that level was on Oct. 15, 2015 at 45.85. 

“We could see it breach the 45 level but not without strong resistance from the BSP [Bangko Sentral ng Pilipinas] who has been helping slow the sharp appreciation trend,” Mapa said.

The peso’s weakest level against the greenback this year was recorded on Jan. 26, when it finished at 47.995 against the dollar. It was the currency’s lowest level since closing at 48.05 on Sept. 16, 2009, at the height of the global financial crisis.

Economists from the First Metro Investment Corp. and University of Asia and the Pacific earlier said the peso might trade between 48 and 49 against the greenback this year, taking into consideration the volatility in the global financial markets.

Officials of the inter-agency Development Budget Coordination Committee set a foreign exchange target range of 45 to 48 pesos a dollar this year, from the previous target of 43 to 46.

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