Peso may be range-bound before BSP meeting
THE PESO may be range-bound against the dollar this week as the market awaits the Philippine central bank’s policy meeting.
The local unit closed at P57.28 per dollar on Friday, strengthening by 3.6 centavos from its P57.316 finish on Thursday, Bankers Association of the Philippines data showed.
This was the peso’s best finish in more than three months or since its P57.221-a-dollar close on May 7.
Week on week, the peso surged by 80 centavos from its P58.08 close on Aug. 2.
The peso continued to strengthen against the dollar on Friday following stronger-than-expected gross domestic product (GDP) growth in the second quarter, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“Rallies continued to attract good selling interest post-GDP release,” Security Bank Corp. Chief Economist Robert Dan J. Roces likewise said in a Viber message.
Philippine GDP expanded by 6.3% in the second quarter, the government reported on Thursday. This was faster than the revised 5.8% growth in the first quarter and the 4.3% clip a year ago.
This was also above the 6% median estimate in a BusinessWorld poll of 19 economists.
In the first semester, economic growth averaged 6%. The government is targeting 6-7% GDP growth this year.
For this week, peso-dollar trading will largely depend on the Bangko Sentral ng Pilipinas’ (BSP) policy review on Aug. 15 (Thursday), Mr. Ricafort said.
Analysts are divided on the Monetary Board’s rate decision this week as faster headline inflation in July caused BSP Governor Eli M. Remolona, Jr. to take a less dovish policy stance.
A BusinessWorld poll conducted last week showed that nine out of 16 analysts surveyed expect the central bank to deliver a 25-basis-point (bp) rate cut at Thursday’s review.
This would bring the target reverse repurchase rate to 6.25% and would be the first reduction in benchmark borrowing costs since November 2020, or during the coronavirus pandemic.
The BSP has kept its policy rate at an over 17-year high of 6.5% since October 2023 following increases worth 450 bps.
The Monetary Board is now “a little bit less likely” to cut rates at this week’s policy meeting following the elevated July inflation print, Mr. Remolona said last week.
Headline inflation picked up to a nine-month high of 4.4% in July from 3.7% in June, the Philippine Statistics Authority reported last week. This was slower than the 4.7% print in the same month a year ago and was within the BSP’s 4%-4.8% forecast for the month.
However, this was the fastest print in nine months or since the 4.9% clip in October 2023. It also marked the first time since November that inflation exceeded the central bank’s 2-4% annual target.
Mr. Ricafort sees the peso moving between P57 and P57.50 per dollar this week. — A.M.C. Sy