Peso climbs to near 14-month high with more rate cuts likely
Peso climbs to near 14-month high with more rate cuts likely
THE PESO surged to a near 14-month high against the dollar on Wednesday after the Bangko Sentral ng Pilipinas (BSP) chief signaled further policy easing following the better-than-expected April inflation outturn.
The local unit closed at P55.396 per dollar on Wednesday, strengthening by 21.4 centavos from its P56.61 finish on Tuesday, Bankers Association of the Philippines data showed.
This was the peso’s strongest finish in almost 14 months or since its P55.31-a-dollar close on March 12, 2024.
The peso opened Wednesday’s trading session stronger than Tuesday’s close at P55.40 against the dollar. Its worst showing was at just P55.48, while its intraday best was at P55.215 versus the greenback.
Dollars traded went down to $2.07 billion on Wednesday from $2.28 billion on Tuesday.
“The peso initially traded at P55.215 after BSP Governor Eli M. Remolona, Jr. said the central bank will not intervene with the peso’s strength but slightly bounced in response to the BSP chief’s statements signifying 75 basis points (bps) more in rate cuts this year,” the first trader said in a phone interview.
“The peso recovered following the cooler-than-expected Philippine inflation report,” the second trader said in an e-mail.
Mr. Remolona signaled that authorities are unlikely to intervene to curb the strength in the peso, Bloomberg reported.
“This is a story of dollar weakness,” Mr. Remolona said in a mobile-phone message on Wednesday. “To intervene now would be to go against the tide.”
The stance of the Bangko Sentral ng Pilipinas stands in contrast to peers in Taiwan and Hong Kong, who have intervened in the market to slow the pace of appreciation in their currencies.
Mr. Remolona also said on Wednesday that the central bank is open to cutting its key interest rate by a further 75 bps for the rest of the year as inflation continued to ease.
Philippine headline inflation slowed to an over five-year low of 1.4% in April from 1.8% in March and 3.8% in the same month a year ago.
This was within the BSP’s 1.3% to 2.1% forecast for the month and well below the 1.8% median estimate in a BusinessWorld poll of 14 analysts conducted last week.
For Thursday, the first trader expects the peso to move between P55 and P55.60 per dollar, while the second trader sees it ranging from P55.50 to P55.75. — Aaron Michael C. Sy with Bloomberg
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