The peso is at its best, back to P56: $1

The peso posted its best finish in more than two months on Wednesday, rising 43.5 centavos to end the day at P56.94 against the dollar.

The last time the currency was in the P56:1 dollar zone was on September 13 when it closed at P56.77.

The trade opened at P57.25 and ranged from P56.94 to P57.33. The total volume for the day was $687.85 million, up slightly from the $684.4 million in the previous session.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the peso is likely to strengthen given the expected increase in dollars sent home by overseas Filipino workers (OFWs).

“yes [it will increase]ahead of the next seasonal rise in remittances abroad and conversion into pesos [compulsory in nature] In preparation for the December 2022 holidays, especially a few days/weeks before the Christmas and New Year holidays.”

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This was echoed by Domini Velazquez, chief economist at the Bank of China, who said that “the peso benefits from inflows of remittances in the last months of the year. Seasonally, in most years, the peso appreciates from October to November, and sometimes in December.”

“The relatively weak dollar helped the peso gain strength today,” she added.

Velasquez also noted that Bangko Sentral ng Pilipinas (BSP)’s continued signals of further interest rate increases to support the peso “seems to help curb the speculative activities that weakened the peso a few months ago.”

“An interest rate differential of 100 basis points (base points) between the Bills Settlement Payment Policy (BSP) rate and the federal funds rate appears to be the ‘perfect point’ for stabilizing the domestic currency. Going forward, we expect the BSP to maintain this spread At least until the first quarter of 2023.

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