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THE PESO strengthened against the greenback on Thursday as global crude oil prices declined and the reduction in smaller banks’ reserve requirement ratio (RRR) announced yesterday.
The local currency closed at P52.50 against the US dollar, three centavos stronger than the P52.53 finish the previous day.
The local currency opened stronger at P52.48 against the greenback, which was already its best showing for the day. Meanwhile, it posted an intraday low of P52.55.
Trading volume thinned to $740 million yesterday from the $777.95 million that switched hands the previous day.
Michael L. Ricafort, economist at the Rizal Commercial Banking Corp. (RCBC), said the peso strengthened “after the latest decline in global crude oil prices and as the markets anticipate the latest RRR cut for smaller banks.”
The Bangko Sentral ng Pilipinas (BSP) yesterday said its policy-setting Monetary Board (MB) decided to cut the reserve ratios of thrift, rural and cooperative lenders following the reduction of the RRR of universal and commercial banks (UKBs) announced last week.
MB Member Felipe M. Medalla said thrift banks’ RRR, currently at 8%, will be cut by 200 basis points (bp) in three tranches to 6%, following the same schedule set for UKBs.
The 5% reserve ratio imposed on rural and cooperative banks’ demand and savings deposits will also be cut to 4% by May 31 — the effectivity of the first tranche of reductions for UKBs’ and thrift banks’ RRRs.
Last week, the BSP said that it will slash big banks’ RRR by 200 bps to 16% from the current 18%, with the first 100-bp reduction to take effect on May 31. This will be followed by a 50-bp cut on June 28 and another 50-bp cut on July 26.
The peso also climbed “on seasonal increase in OFW (overseas Filipino workers) remittances and conversion to pesos to finance some tuition payments, school opening-related expenses, vacations, and fiesta celebrations around the country, all for the month May, especially in the latter part of the month and even up to June,” RCBC’s Mr. Ricafort added.
He said proceeds from the government’s recent euro and panda bond sales also supported the peso.
“Recent upward correction/gains in the local stock market especially after the RRR cut announcement since last week also led to a stronger peso,” Mr. Ricafort added.