THE PESO could strengthen further against the dollar before the Bangko Sentral ng Pilipinas’ (BSP) policy meeting on Thursday, where it is expected to deliver a third straight rate cut.
On Friday, the local unit closed at P56.95 per dollar, inching up by a centavo from its P56.96 finish on Wednesday, data from the Bankers Association of the Philippines showed.
Week on week, the peso climbed by 11.5 centavos from its P57.065 close on Aug. 15.
The peso rose on Friday after Japan-based credit rater Rating and Investment Information, Inc. affirmed the Philippines’ investment-grade “A-” rating with a stable outlook amid steady economic growth, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
He said this was a “continued vote of confidence on the country’s economic and credit fundamentals from the point of view of international investors and creditors.”
The peso moved sideways against the dollar on Friday on expectations of hawkish signals from US Federal Reserve Chair Jerome H. Powell’s speech at the US central bank’s Jackson Hole symposium, Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said in a Viber message.
“The peso’s close last Friday reflected lingering pressure from external headwinds, particularly expectations of a prolonged higher-for-longer stance by the Fed and persistent geopolitical tensions,” Mr. Rivera said.
“Despite easing inflation locally, the peso remains vulnerable to global US dollar strength and risk-off sentiment.”
Mr. Powell on Friday signaled a possible interest rate cut at the US central bank’s meeting next month, saying that risks to the job market were rising but also noting inflation remained a threat and that a decision wasn’t set in stone, Reuters reported.
While his comments were not as explicit as those previewing rate cuts following last year’s Jackson Hole conference, investors quickly bumped up bets that the Fed will reduce its policy rate by a quarter of a percentage point at its Sept. 16-17 meeting.
“The stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance,” Mr. Powell told international economists and policymakers at the Fed’s annual conference in Wyoming. “Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
Traders assigned about an 85% probability that the Fed would deliver a quarter-percentage-point rate cut next month, up from about 75% earlier in the day. Market bets also strongly favor a second rate cut in December.
For this week, Mr. Ricafort said the peso could rise ahead of an expected rate cut from the BSP at its policy meeting on Thursday.
The Monetary Board will hold its policy meeting on Thursday (Aug. 28). BSP Governor Eli M. Remolona, Jr. earlier said that a rate cut is “quite likely” this week amid benign inflation.
If realized, this would be the BSP’s third straight reduction since April. The Monetary Board has lowered benchmark interest rates by a cumulative 125 basis points since it began its easing cycle in August 2024, with the policy rate now at 5.25%.
Meanwhile, Mr. Rivera said the peso could weaken if “global oil prices rise or if remittance inflows taper post-back-to-school season.”
“Markets will also watch for US data releases and signals from the BSP on rate adjustments.”
Mr. Ricafort sees the peso moving between P56.75 and P57.25 against the dollar this week, while Mr. Rivera expects it to range from P56.50 to P57.50. — A.M.C. Sy with Reuters
