Analysts say peso may trade sideways before BSP meeting
THE PESO may move sideways against the dollar this week ahead of the Bangko Sentral ng Pilipinas (BSP) policy meeting.
The peso closed at P55.911 a dollar on Thursday, 3.9 centavos stronger than its close on Wednesday, Bankers Association of the Philippines data showed. Week on week, the peso strengthened by 0.9 centavo from P55.92 on Feb. 2.
Financial markets were closed on Friday for the Chinese New Year.
The peso will move depending on the policy decision of the BSP on Feb. 15, Robert Dan J. Roces, chief economist at Security Bank Corp., said in a Viber message.
Fifteen of 17 analysts in a BusinessWorld poll last week expect the Monetary Board to keep the target reverse repurchase (RRP) rate at 6.5% on Thursday.
Two analysts said the Monetary Board might cut policy rates by 25 basis points (bps) to 6.25% after inflation slowed to a three-year low in January.
The Monetary Board raised borrowing costs by 450 bps from May 2022 to October 2023, bringing the policy rate to a 16-year high of 6.5%.
The peso could be supported by a relatively hawkish BSP despite a slower-than-expected January inflation, Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said in a Viber message. “Citing upside risks to inflation, BSP noted it is ready to keep monetary settings sufficiently tight.”
BSP Governor Eli M. Remolona, Jr. earlier said a rate cut is unlikely in the first half and there is still room to raise interest rates amid risks to inflation and robust economic growth.
Inflation eased to 2.8% in January from 3.9% in November and 8.7% a year ago, the slowest in three years. It was also the second straight month that inflation fell within the central bank’s 2-4% target.
“Nonetheless, we continue to see the risk skewed towards the US Fed easing and therefore favoring the dollar,” Mr. Asuncion said.
The US Federal Reserve raised borrowing costs by 525 bps from March 2022 to July 2023 to 5.25-5.5%.
Mr. Asuncion expects the peso to trade at P55.60 to P56.20 a dollar, while Mr. Roces sees it moving between P55.80 and P56.20. — Aaron Michael C. Sy
