THE PESO could trade sideways against the dollar this week on expectations that the Bangko Sentral ng Pilipinas (BSP) would be more hawkish than the US Federal Reserve as domestic inflation remains elevated.

The local currency closed at P54.35 versus the greenback on Friday, down by eight centavos from Thursday’s P54.27 finish, Bankers Association of the Philippines data showed.

Still, week on week, the peso climbed by 36 centavos from its P54.71 finish on March 17.

The peso opened Friday’s session at P54.36 per dollar. Its worst showing was at P54.42, while its intraday best was at P54.22 versus the greenback.

Dollars traded declined to $1.036 billion on Friday from the $1.136 billion recorded on Thursday.

The peso weakened on Friday due to gains at the US stock market overnight, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For this week, the peso may trade sideways against the dollar “after the BSP appeared more hawkish than the Fed in the latest round of policy rate adjustments,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a report.

“Against this backdrop, our trader’s bias is to sell the dollar on rally,” Mr. Asuncion added.

The Fed last week hiked its target interest rate by 25 basis points (bps) to a range between 4.75% and 5%, with its chief signaling a pause soon following the collapse of two US banks.

The US central bank has now raised rates by 475 bps since March 2022.

Meanwhile, the BSP also raised benchmark interest rates by 25 bps as it seeks to anchor inflation expectations. The latest move brought its policy rate to 6.25%, with total increases since May 2022 now at 425 bps.

BSP Governor Felipe M. Medalla said after the Monetary Board’s meeting that risks to the inflation outlook remain tilted to the upside as supply shortages weigh on food prices, with higher transport fares, electricity rates, and above-average wage hikes expected to add to pressures.

“Further policy tightening will also preserve the buffer against external spillovers amid heightened uncertainty and volatility emanating from financial sector distress in advanced economies,” Mr. Medalla said.

Mr. Asuncion expects the peso to trade between P54.15 and P54.85 this week, while Mr. Ricafort sees it moving from P54.10 to P54.60. — A.M.C. Sy

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