The PESO rose against the dollar on Wednesday after the Japanese central bank unexpectedly raised interest rates.
The local unit closed at P58.365 per dollar on Wednesday, up 28 centavos from Tuesday’s P58.645, data from the Bankers Association of the Philippines showed.
The peso opened Wednesday’s session stronger at P58.58 against the dollar, already the worst performance of the day. The intraday best stood at P58.35 against the dollar.
Dollars exchanged rose to $1.295 billion on Wednesday from $1.23 billion on Tuesday.
The peso rose against a generally weaker dollar after the Bank of Japan (BoJ) cut elevated interest rates and signaled further gains within the year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said. in a Viber message.
The peso followed the yen’s strength against the dollar after the BoJ’s decision, a trader said in a telephone interview.
“There was profit taking and position adjustments ahead of the Federal Open Market Committee policy announcement,” the trader added.
The Bank of Japan, in a largely unexpected move, raised interest rates on Wednesday and unveiled a detailed plan to slow its massive bond buying, taking another step toward winding down a decade of massive stimulus, Reuters reported.
The decision, which went against dominant market expectations that the BoJ would continue to hold rates, takes short-term interest rates to levels not seen since 2008.
BoJ Governor Kazuo Ueda did not rule out another rate hike this year and indicated that the bank is prepared to steadily raise financing costs in the coming years to levels considered neutral for the economy.
The hawkish comments pushed the dollar below 151 yen for the first time since March, as markets woke up to the reality that Japan was finally eyeing a full-fledged rate hike cycle.
Japan’s shift to tighter monetary policy also stands in stark contrast to the broad turn to lower interest rates by other major economies, with the Federal Reserve expected to signal later on Wednesday that it will cut rates in September as price pressures ease. in the US is declining.
During the two-day meeting that ended on Wednesday, the BoJ board decided to increase the overnight call rate to 0.25% from 0-0.1% by a 7-2 vote.
It also decided on a quantitative tightening plan that would roughly halve monthly bond purchases to 3 trillion yen ($19.6 billion), from the current 6 trillion yen, between January and March 2026.
The yen rose to 150.88 per dollar after Mr. Ueda’s comments on choppy trading.
The move comes as the Fed appears increasingly inclined to cut rates, reversing an aggressive tightening cycle that lifted the dollar and caused a painful yen sell-off for Japan.
For Thursday, the peso’s movement against the dollar will largely depend on the Fed’s policy statement tonight, the trader said.
Meanwhile, Mr. Ricafort sees the peso moving between P58.25 and P58.45 per dollar on Thursday. — BMDC of Reuters