THE PESO climbed on Friday on hints from the US Federal Reserve that it will keep borrowing costs low this year to push inflation up.
The local unit closed at P48.485 versus the greenback on Friday, appreciating by 47.5 centavos from Thursday’s P48.63 finish, data from the Bankers Association of the Philippines showed.
The peso opened Friday’s session at P48.60 per dollar, which was also its intraday low. Meanwhile, the local unit climbed to as high as P48.45 during the session.
Dollars traded climbed to $1.191 billion on Friday from Thursday’s $776.07 million.
A trader said the peso rose following the US central bank chief’s remarks on policy and inflation.
“Federal Reserve Chairman Jerome Powell will allow inflation to go ‘moderately’ above 2% for ‘some time to make up for the previous shortfalls from its inflation target,” the trader said.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the Fed’s position pushed down the dollar.
“The US Federal Reserve to allow inflation to go higher led to the declines in government bonds, thereby partly leading to the weaker US dollar as a sell-off in US bonds. The US Treasury further reduced the allure of the dollar with still record low interest rates,” Mr. Ricafort said.
The Fed on Thursday rolled out a sweeping rewrite of its approach to its dual role of achieving maximum employment and stable prices, putting new weight on bolstering the US labor market and less on worries about too-high inflation, Reuters reported.
The Fed’s new monetary policy strategy, unveiled at the start of an annual central banking conference, pledges to address “shortfalls” from the “broad-based and inclusive goal” of full employment, a nod to research showing racial income disparities hold back economic growth.
It also promises to aim for 2% inflation on average, so that periods of too-low inflation would likely be followed by an effort to lift inflation “moderately above 2% for some time.”
The change suggests the US central bank’s key overnight interest rate, already near zero, will stay there for potentially years to come as policymakers woo higher inflation.
Mr. Ricafort expects the peso to move from P43.30 to P48.70 versus the dollar on Tuesday. Markets are closed on Monday for National Heroes’ Day. — KKTJ