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Peso climbs vs dollar on strong PMI data

THE PESO strengthened against the greenback on Monday supported by improved manufacturing data.

The local unit closed at P48.065 versus the dollar yesterday, gaining 1.5 centavos from its P48.08 finish on Friday, data from the Bankers Association of the Philippines showed.

The peso opened Monday’s session at P48.06 a dollar. It moved in a tight range, with its weakest showing at P48.077 and its strongest intraday level at P48.05 against the greenback.

Dollars that changed hands increased to $787.95 million on Monday from $685.7 million on Friday.

The improvement in factory activity data boosted sentiment on the local unit, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

IHS Markit on Monday said the country’s purchasing managers’ index (PMI) stood at 52.5 in January, beyond the 50 neutral mark that separates expansion from contraction. This is the highest reading in 25 months or since the 53.2 print in December 2018, ending three straight months of consecutive declines.

The improvement in the PMI reading reflects a rebound in the local manufacturing industry’s operating conditions, IHS Markit economist Shreeya Patel said in a note.

Meanwhile, a trader said the peso’s gains came following developments related to the United States government’s coronavirus pandemic response.

“The peso appreciated as Republicans were reportedly demanding for a smaller stimulus package from the $1.9-trillion bill proposed by President [Joseph R.] Biden [Jr.],” the trader said in a text message.

Reuters reported that 10 Republican senators spoke with Mr. Biden to discuss downsizing his administration’s proposed $1.9-trillion stimulus to win bipartisan support and eventually pass the bill.

A White House economic adviser earlier signaled being open to discuss a smaller $600-billion stimulus floated by Republicans.

For today, Mr. Ricafort gave a forecast range of P48.04 to P48.08 per dollar while the trader expects a wider band of P48 to P48.10. — L.W.T. Noble with Reuters

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