Peso may move sideways vs the dollar
THE PESO could trade sideways against the dollar this week ahead of US Federal Reserve Chair Jerome H. Powell’s speech on Friday and after the Bangko Sentral ng Pilipinas (BSP) kept borrowing costs unchanged.
The local unit closed at P56.18 versus the dollar on Friday, strengthening by 59 centavos from Thursday’s P56.77 finish, data from the Bankers Association of the Philippines’ website showed.
Week on week, the peso dropped by 13.50 centavos from its P56.315 close on Aug. 11.
The local unit opened Friday’s session at P56.65 per dollar, which was also its weakest showing. Its intraday best was at P56.14 against the greenback.
Dollars traded rose to $1.46 billion on Friday from the $960.55 million recorded on Thursday.
The peso strengthened against the dollar on Friday after the BSP kept its key rate unchanged in a “hawkish pause,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The BSP kept its benchmark interest rates steady for a third straight meeting on Thursday, but signaled that it is prepared to resume tightening if needed amid risks to inflation.
The Monetary Board left its overnight reverse repurchase rate unchanged at a near 16-year high of 6.25%, as expected by 13 economists in a BusinessWorld poll. Interest rates on the overnight deposit and lending facilities were maintained at 5.75% and 6.75%, respectively.
The BSP has raised borrowing costs by 425 basis points (bps) from May 2022 to March 2023 to tame inflation.
BSP Governor Eli M. Remolona, Jr. said in an interview with CNBC on Friday that the BSP has room to resume hiking interest rates without contracting the economy, Reuters reported.
The Philippines has ample foreign exchange reserves to weather external shocks, Mr. Remolona told CNBC, a day after monetary authorities kept benchmark rates unchanged for the third straight meeting.
He likewise said after the meeting on Thursday that the BSP is “ready to tighten” if necessary, as it keeps a close eye on developments that may impact inflation.
Headline inflation eased for the sixth consecutive month to 4.7% in July from 5.4% in June, bringing the seven-month average to 6.8%.
The BSP will next meet on Sept. 21 to review policy.
For this week, the peso could trade sideways due to the BSP’s hawkish stance and as the market awaits Mr. Powell’s speech on Friday for signals on the US central bank’s next move, Mr. Ricafort said.
Mr. Powell is scheduled to deliver a speech on the economic outlook at the Kansas City Jackson Hole Economic Policy Symposium on Aug. 25.
The Fed raised interest rates by 25 bps last month, bringing its benchmark overnight rate to a range between 5.25% and 5.5%.
The US central bank has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.
The Federal Open Market Committee will next meet on Sept. 19-20 to review policy.
For this week, Mr. Ricafort expects the peso to range from P56 to P56.50 per dollar. — A.M.C. Sy with Reuters
