Peso rises on hot money data
The PESO strengthened against the greenback on Friday, with central bank data showing more foreign funds entered than they left the country in May.
Local unit closed at P48.481 to the dollar on Friday, appreciating 25.4 centavos from P48.735 on Thursday, according to data from the Philippine Bankers Association.
Week after week, however, it weakened by 5.1 centavos from its level of 48.43 P to the dollar on June 18.
The peso opened Friday’s session at P48.65 against the dollar. Its weakest performance was at P48.66, while its best intraday was at P48.45 against the greenback.
The dollars traded fell to $ 985.2 million from $ 1.005 billion on Thursday.
The peso rose as data showed hot money generated net inflows last month, Rizal Commercial Banking Corp’s chief economist said. Michael L. Ricafort in a text message.
Foreign portfolio investment posted a net inflow of $ 416.74 million in May, according to data released Friday by the Bangko Sentral ng Pilipinas (BSP). This is a turnaround from the net outflows of $ 1.06 billion seen in the same month of 2020 as well as the net $ 373.95 million that left the country in April.
Meanwhile, a trader attributed the appreciation of the peso to the central bank’s revised inflation forecast.
“The peso appreciated after the BSP revised upward its inflation projections despite keeping key rates unchanged,” the trader said in an email.
The BSP kept its policy rate at an all-time high for a fifth consecutive meeting on Thursday, as it pledged to maintain an accommodative stance to support the economic recovery.
The central bank left the overnight repo facility rate at 2%, as widely expected by 14 of 16 analysts in a BusinessWorld poll last week.
Interest rates on the deposit and demand loan facilities were also maintained at 1.5% and 2.5% respectively.
Meanwhile, the central bank raised the inflation outlook for this year to 4% from the previous forecast of 3.9%. This corresponds to the upper end of the 2% to 4% BSP target.
If this were to happen, it would be faster than the 2.6% recorded in 2020.
On the other hand, inflation is expected to average 3% for 2022 and 2023. – LWTN