Peso rebounds as regulator intervenes in market
THE PESO rebounded against the dollar on Tuesday as the Bangko Sentral ng Pilipinas (BSP) intervened to cap its weakness.
The local currency closed at P52.24 versus the greenback, up 10 centavos from its P52.34-perdollar finish on Monday.
The peso traded stronger the whole day, opening the session at P52.28 against the greenback. It hit a low of P52.31 intraday, while its best showing was at P52.165 per dollar.
Dollars traded declined to $ 977.8 million from the $ 1.025 billion that changed hands in the previous trading session.
Traders interviewed over the phone said the peso moved within range as the BSP intervened throughout the session.
“We saw suspected BSP intervention [ yesterday], actually throughout the day, that’s why we saw the peso gain 10 centavos,” a trader said.
As the country’s monetary authority, the BSP sometimes conducts “tactical interventions” in foreign exchange trading to temper any sharp swings that may cause the peso to appreciate or depreciate.
The trader said the BSP intervened following the peso’s sharp drops in the past few days.
On Monday, the peso plunged to P52.34 from the P52 closing
last Thursday, its weakest in nearly 12 years or since it closed at P52.745 on July 19, 2006.
The decline was brought about by the BSP’s move to cut big banks’ reserve requirement ratio to 19% from 20%.
A trader explained on Monday that the peso weakened as the reserve requirement cut releases more money into the financial system.
“If there’s more [of the] peso circulating, it will be less valuable,” the trader said.
Meanwhile, the trader added that there was some selling around the peso’s intraday high.
“I think those were banks just reducing their position,” the trader added.
For today, the second trader sees the peso moving between P52.20 and P52.40, while the other trader sees the pair trading from P52.15 to P52.35 against the greenback.
Another trader gave a wider forecast range of P52.05 to P52.45 as the peso is seen to weaken “ahead of likely firm US PMI (purchasing managers’ index) sectoral reports and US new home sales data,” which may boost the dollar.