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Peso rises on oil’s decline

PHILIPPINE STAR/ WALTER BOLLOZOS

THE PESO strengthened further against the dollar on Wednesday on lower global oil prices and better Philippine employment and factory data.

The local currency ended at P55.45 against the greenback on Wednesday, surging by 52.5 centavos from P55.975-a-dollar close on Tuesday, based on data from the Bankers Association of the Philippines.

The peso opened stronger at P55.85 per dollar on Wednesday, which was also its weakest point. Its intraday best was at its close of P55.45 versus the greenback.

Dollars traded climbed to $1.16 billion on Wednesday from $776.56 million the day prior.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso ended stronger on Wednesday as global oil prices declined to their lowest in nearly a year on Tuesday.

Brent crude futures edged up 3 cents or 0.04% to $79.38 a barrel by 0717 GMT on Wednesday, after they fell below $80 for the second time this year on Tuesday.

US crude futures mostly traded sideways, and were down 9 cents or 0.12% to $74.16 a barrel.

Brent’s slump on Tuesday was the largest daily decline since late September, which have traded in a $62 range this year.

“The peso was also stronger after mostly better Philippine economic data mixed recently,” Mr. Ricafort said.

Unemployment rate eased to a record low of 4.5% in October, based on the Labor Force Survey of the Philippine Statistics Authority (PSA). It was lower than 5% in September and the 7.4% in October last year.

Meanwhile, preliminary results of the PSA’s Monthly Integrated Survey of Selected Industries showed the volume of production index went up by 5.1% year on year in October.

It was the sector’s fifth straight month of growth after the 0.5% decline in May. Year to date, factory output rose by 17.4%.

“The peso appreciated as the higher-than-expected local inflation report bolstered expectations of a stronger BSP (Bangko Sentral ng Pilipinas) rate hike this month,” a trader said in an e-mail.

Headline inflation accelerated to 8% year on year in November, exceeding the BSP’s 2-4% target for the eighth straight month. This was faster than the 7.7% in October and 3.7% a year ago.

It brought the year-to-date average to 5.6%. This is still below the BSP’s 5.8% average inflation forecast for this year.

The BSP has raised benchmark interest rates by 300 bps since May to curb soaring prices. The Monetary Board’s last policy review meeting for the year is on Dec. 15.

For Friday, “the local currency might strengthen ahead of a potentially lower US producer inflation report,” the trader said.

Philippine financial markets are closed on Thursday in observance of the Feast of the Immaculate Conception of Mary.

Mr. Ricafort sees the peso settling within P55.30-55.60 on Friday, while the trader said it could move at P55.30 to P55.55 per dollar. —K.B. Ta-asan with Reuters

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