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Peso weakens ahead of BSP meeting

THE PESO weakened versus the dollar on Thursday ahead of the central bank’s latest policy decision and after the New York City government ordered schools to close again amid rising cases of the coronavirus disease 2019 (COVID-19) there.

The local unit closed at P48.315 versus the dollar on Thursday, decreasing by 9.5 centavos from its P48.22 finish on Wednesday, data from the Bankers Association of the Philippines showed.

The peso opened Thursday’s session at P48.25 against the greenback. Its intraday best stood at P48.245, while its weakest showing was at P48.33 versus the dollar.

Dollars traded rose to $692.3 million on Thursday from $635.8 million on the previous day.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso declined ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy decision in the afternoon on Thursday.

“The peso was weaker ahead of the BSP monetary policy-setting later today with possible reserve requirement ratio cut or monetary easing measures,” he said in a text message on Thursday.

The BSP Monetary Board on Thursday cut benchmark rates by another 25 basis points (bps) to bring the rates on its overnight reverse repurchase, deposit and lending facilities to two percent, 1.5% and 2.5%, respectively, effective Friday. This brings the central bank’s cumulative cuts for the year to 200 bps.

In a BusinessWorld poll last week, 11 out of 16 analysts had expected the BSP to continue its “prudent pause” at its sixth policy meeting. Some analysts, however, pointed to the sluggish pace of recovery and benign inflation as signs there is still room for the central bank to cut rates. 

“The peso weakened due to some market caution ahead of the BSP policy decision later today. There was also some safe-haven demand after New York City announced the re-imposition of school closures amid increasing COVID-19 new cases,” the trader said in an e-mail.

The US death toll from COVID-19 surpassed a grim new milestone of 250,000 lives lost on Wednesday, as New York City’s public school system, the nation’s largest, called a halt to in-classroom instruction, citing a jump in coronavirus infection rates, Reuters reported.

The decision to shutter schools and revert exclusively to at-home learning, starting on Thursday, came as state and local officials nationwide imposed restrictions on social and economic life to tamp down a surge in COVID-19 cases and hospitalizations heading into winter.

For today, Mr. Ricafort sees the peso moving from P48.22 to P48.37 versus the dollar, while the trader expects it to range from P48.20 to P48.40. — KKTJ

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