Peso rallies back to 55:$1 level

The Philippine peso rallied back to the 55-level against the broadly weak dollar on Friday, posting its strongest finish in almost six months as fresh key data justified the early easing of the Bangko Sentral ng Pilipinas (BSP) and fanned expectations of a larger rate cut by the US Federal Reserve.

The local currency capped the week at 55.905 against the greenback, 30.5 centavos stronger than its previous closing of 56.21.

This was the peso’s strongest performance since finishing at 55.92 versus the dollar on March 19, 2024. The local unit’s best showing yesterday stood at 55.88, figures showed.

Trading was also heavy, with $1.5 billion changing hands. At this point, the peso is above the 56 to 58 assumption of the Marcos administration for this year.

Weak jobs data

Robert Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, said the dollar retreated after weak jobs data coming out in the United States stoked expectations of a 50-basis point (bp) rate cut by the Fed, larger than the 25-bp reduction that traders penciled in previously.

This, while “resumption of faster disinflation” at home vindicated the BSP’s decision to cut the policy rate by 25 bp to 6.25 percent on August, which boosted the peso.

“Latest Philippine jobless data may have also supported the view that the BSP should continue its monetary policy easing,” Asuncion said.

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Robert Dan Roces, chief economist at Security Bank, expressed a similar sentiment, adding that the upcoming US unemployment data “could further impact” US dollar-peso prices.

BSP Governor Eli Remolona Jr. had said the market can expect a “calibrated” shift to a less restrictive monetary policy, adding that another 25-bp rate reduction was possible either at the Oct . 17 or Dec. 19 meeting of the policymaking Monetary Board.

Latest data showed inflation slowed to 3.3 percent in August, the lowest level in seven months and easing back to within the 2 to 4 percent target range of the BSP. The central bank had said the lower tariffs on rice, a major food staple of Filipino households, would pull down the prices of the commodity and help keep the headline inflation rate within its target band.