Peso strengthens back to 56:$1 level
The Philippine peso rallied back to the 56-per-dollar level on Tuesday to post its strongest finish in nearly four months, amid a “risk-on” sentiment ahead of the Bangko Sentral ng Pilipinas’ (BSP) rate setting meeting this week.
The local currency ended the Tuesday trading at 56.96 against the dollar, 35.6 centavos stronger than its previous closing. This is the peso’s strongest performance since closing at 56.808 on April 15, 2024.
The peso’s best-showing yesterday stood at 56.92. Trading was also heavy, with $1.8 billion switching hands.
“The Philippine peso and other Asian currencies appreciated against the US dollar, driven by a wave of risk-on sentiment,” Robert Dan Roces, chief economist at Security Bank, said while pointing out that the rally was due to “technical factors and market dynamics” as investors anticipate key economic indicators, including the decision of the Monetary Board (MB).
A resurgent currency would give the BSP more space to cut rates early. The MB will meet again on Aug. 15 to review the policy rate, which is currently at an over 17-year high of 6.5 percent.
Hard landing?
So far, market expectations on the upcoming BSP meeting are divided.
Some economists expected the BSP to kick off its easing cycle this week after growth of consumer spending—which historically accounts for over 70 percent of gross domestic product (GDP)—eased to 4.6 percent in the second quarter, the weakest seen postpandemic amid high borrowing rates.
However, there were market watchers believing that the above-target inflation rate of 4.4 percent in July could delay the rate cuts, although they did not rule out the possibility of an off-cycle rate reduction as floated by BSP Governor Eli Remolona Jr. himself.
Speaking to reporters on the sidelines of a Senate hearing on the proposed 2025 national budget on Tuesday, Remolona said the 6.3 percent GDP growth last quarter was a “good” figure that might “help” the BSP keep monetary policy settings tight for the time being.
“It (GDP growth) minimizes the risk of a hard landing,” the BSP chief said. “But it’s just one number… we look at all the components.”
