PESO IN BEST FINISH, RETURNS TO P56:$1

THE peso posted its best finish in over two months on Wednesday, gaining 43.5 centavos to end the day at P56.94 versus the dollar.

The last time that the currency was in P56:$1 territory was in September 13 when it closed at P56.77.

Trading opened at P57.25 and ranged from P56.94 to P57.33. The total volume for the day was $687.85 million, slightly higher than the $684.4 million in the previous session.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the peso would likely strengthen further given an expected increase in dollars sent home by overseas Filipino workers (OFWs).

“Yes [it will increase], ahead of the next seasonal surge in OFW remittances and conversion to pesos [compulsory in nature] in preparation for the holidays in December 2022, especially a few days/weeks before the Christmas and New Year holidays,” he said.

This was echoed by China Bank chief economist Domini Velasquez, who said “the peso is benefitting from remittance inflows these last months of the year. Seasonally, most of the years, the peso appreciates from October to November, sometimes even in December.”

“A relatively weaker dollar also helped the peso gain strength today,” she added.

Velasquez also noted that continued Bangko Sentral ng Pilipinas (BSP) signals of further policy rate hikes to support the peso had “seemed to help in reducing speculative activities that weakened the peso a few months ago.”

“It seems that a 100-bp (basis point) interest rate differential between the BSP’s policy rate and the Fed funds rate is the ‘sweet spot’ to stabilize the local currency. Moving forward, we expect the BSP to maintain this differential at least until the first quarter of 2023,” she added.