THE PESO surged against the dollar on Wednesday after Japan’s central bank unexpectedly hiked rates.
The local unit closed at P58.365 per dollar on Wednesday, strengthening by 28 centavos from its P58.645 finish on Tuesday, Bankers Association of the Philippines data showed.
The peso opened Wednesday’s session stronger at P58.58 against the dollar, which was already its worst showing for the day. Its intraday best was at P58.35 versus the greenback.
Dollars exchanged rose to $1.295 billion on Wednesday from $1.23 billion on Tuesday.
The peso rose against a broadly weaker dollar after the Bank of Japan (BoJ) cut raised rates and signaled more increases within the year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The peso tracked the yen’s strength against the dollar after the BoJ decision, a trader said in a phone interview.
“There was profit taking and position trimming ahead of the Federal Open Market Committee’s policy announcement,” the trader added.
The Bank of Japan raised interest rates in a mostly unexpected move on Wednesday and unveiled a detailed plan to slow its massive bond buying, taking another step towards phasing out a decade of huge stimulus, Reuters reported.
The decision, which defied dominant market expectations for the BoJ to stand pat on rates, takes its short-term policy rate to levels unseen since 2008.
BoJ Governor Kazuo Ueda did not rule out another interest rate hike this year and signaled the bank’s readiness to steadily hike borrowing costs to levels deemed neutral to the economy in coming years.
The hawkish comments pushed the dollar below 151 yen for the first time since March, as markets awaked to the reality that Japan was finally eyeing a full-fledged rate hike cycle.
Japan’s shift to tighter monetary policy also contrasts sharply with the broad swing 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 US price pressures moderate.
At the two-day meeting ending on Wednesday, the BoJ’s board decided to raise the overnight call rate target to 0.25% from 0-0.1% in a 7-2 vote.
It also decided on a quantitative tightening plan that would roughly halve monthly bond buying to 3 trillion yen ($19.6 billion), from the current 6 trillion yen, as of January-March 2026.
The yen rallied to 150.88 to the dollar on Mr. Ueda’s comments in choppy trade.
The decision comes as the Fed looks increasingly set on cutting interest rates, reversing an aggressive tightening cycle that drove up 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 overnight, the trader said.
Meanwhile, Mr. Ricafort sees the peso moving between P58.25 and P58.45 per dollar on Thursday. — BMDC with Reuters
