Peso nears 46 to dollar after US Fed action

The peso yesterday rose to a fresh 6.5 year high, moving in tandem with regional currencies, that soared on US Fed’s decision to hold the target funds rate unchanged at 5.26 percent.

Several traders said the currency which rose to 47.15 to the dollar may rise to the 46 level soon.

Others said the peso may go back to 47.47 on prospects of higher interest rates.

The peso closed at 47.18, 11 centavos stronger than 47.29 Wednesday. It opened at 47.18 then traded between 47.23-47.15.

Turnover at the Philippine Dealing System amounted to $592.5 million from $612.24 million.

Traders said positive developments including the plan of Texas Instruments to invest an additional $1 billion in the country, as well as remittances and flow to the equities market, were supporting the peso.

"There’s a possibility it may hit 46 but what we’re seeing right now is rising interest rates. It’s good for the peso but the stock market is not immune to it. Funds may pull out, causing a fall in stocks," Jonas Ravelas, market strategist of Banco de Oro Universal Bank said.

He said the peso may likely retest 47.47 before appreciating further, adding it may be difficult to say when the peso would cross over to the 46 level.

"For the meantime, it may retest 47.47, although 47.50 is already a bonus," Ravelas said.

A trader at Metrobank said the sentiment on the currency remains bullish, with heavy flows, negating the jitters the Monday elections are creating.

"The peso might be at a range of 47.10-47.50 within the week," the trader said.

Bangko Sentral ng Pilipinas governor Amando Tetangco Jr. said yesterday the Fed’s decision to hold its rate steady provides "balance" to the BSP’s own policy stance.

The Fed, as widely expected, kept the US target funds rate unchanged on slowing growth and inflation.

"The Fed decision to leave the target rate unchanged maintains the balance of factors we considered during our last policy meeting," Tetangco said.

The BSP’s policy rates were unchanged in the April 19 meeting on favorable inflation outlook, though rising liquidity is posing a risk to inflation expectations.