Peso weakens anew against the dollar on BSP rate bets

THE PESO weakened anew against the dollar on Monday as the Bangko Sentral ng Pilipinas (BSP) is expected to keep its key rate steady amid easing inflation, even as the US Federal Reserve remains hawkish.

The local currency closed at P55.32 versus the dollar on Monday, down by 12 centavos from Friday’s finish of P55.20, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Monday’s session lower at P55.25 per dollar. Its weakest showing was at P55.35, while its intraday best was at P55.04 against the greenback.

Dollars traded rose to $1.26 billion on Monday from the $1.05 billion seen on Friday.

“The peso weakened as the potentially weaker Philippine inflation for June 2023 will likely support a continued pause in BSP policy rates despite the expected US rate hike this month,” a trader said in an e-mail.

A BusinessWorld poll of 17 analysts held last week yielded a median estimate of 5.5% for June inflation, within the 5.3% to 6.1% forecast given by the BSP on Friday. If realized, the median estimate will be slower than the 6.1% print in May 2023 and June 2022. It would also be the slowest since the 5.4% in May 2022.

The BSP last month kept borrowing costs unchanged for a second straight meeting. It raised benchmark rates by 425 basis points (bps) from May 2022 to March 2023, bringing the policy rate to a near 16-year high of 6.25%.

Its next review is on Aug. 17.

Meanwhile, the Fed likewise paused its tightening cycle last month after hiking its target interest rate by a total of 500 bps for 10 straight meetings to a range between 5% and 5.25%.

Fed Chair Jerome H. Powell said in remarks last week the US central bank will likely hike rates by 25 bps twice more this year. Their next meeting is on July 25-26.

For Tuesday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort and the trader expect the peso to move between P55.20 and P55.40 against the dollar. — AMCS