THE PESO appreciated on Thursday as demand for dollars declined due to the Bank of England’s (BoE) emergency action to launch a bond program to avoid a meltdown in the gilts market.
The local unit closed at P58.97 against the greenback on Thursday, gaining one centavo from its P58.98 finish on Wednesday, Bankers Association of the Philippines data showed.
The peso started trading at P58.87 per dollar on Thursday. Its weakest showing was at P59, while its intraday best was at P58.75 versus the greenback.
Dollars exchanged fell to $902 million on Thursday from $1.19 billion on Wednesday.
The peso slightly strengthened due to the effect of the BoE’s intervention through purchases of long-dated bonds, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The BoE said on Wednesday it would start a temporary program of bond purchases to stabilize the market and postpone the planned start of its gilt sale program.
“As the Governor said in his statement on Monday, the Bank is monitoring developments in financial markets very closely in light of the significant repricing of UK and global financial assets,” the BoE said in a statement.
“In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses,” it added.
“To achieve this, the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions.”
MUFG Bank Currency Analyst Sophia Ng in a report said even though this move tamed the volatility in the market, it is seen to be inflationary in nature and may have an impact on the pace and magnitude of subsequent rate hikes.
Ms. Ng said the improvements in risk appetite overnight following the launch of the BoE’s emergency bond-buying program “should bring a reprieve for Asian currencies today.”
The peso also strengthened as the local stock market gained on Thursday, Mr. Ricafort said.
The bellwether Philippine Stock Exchange index climbed by 54.57 points or 0.92% to close at 5,934.25 on Thursday, while the broader all shares index inched up by 25.24 points or 0.79% to 3,190.88.
“The peso [was] slightly stronger after crude oil prices [were] still among 8-month lows,” Mr. Ricafort added.
Brent crude futures fell $1.18 or 1.3% to $88.14 a barrel by 0823 GMT and US crude futures dropped by $1.11 or 1.4% to $81.04.
Both benchmarks rebounded in the previous two sessions from nine-month lows earlier in the week, buoyed by a temporary dive in the dollar index and a larger than expected US fuel inventory drawdown.
For Friday, Mr. Ricafort gave a forecast range of P58.80 to P59 per dollar. — Keisha B. Ta-asan