Peso Expected to Maintain Strength as BSP Adopts Hawkish Stance

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The Philippine peso could maintain its strength and hover around the P55 level this week, with signals from the central bank supporting the currency. Closing at a three-month high of P55.67 per dollar on Friday, the peso strengthened by 12 centavos from its previous finish, marking its best close since August 3.

The week-on-week gain amounted to 29 centavos from its November 10 close. Opening Friday’s session stronger at P55.68 against the dollar, the peso’s weakest showing was at P55.69, while its intraday best reached P55.62 against the greenback. Dollar transactions decreased to $1.18 billion on Friday from $1.28 billion on Thursday.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that the peso strengthened on Friday due to a generally weaker dollar and lower global crude oil prices. The local currency also found support from the seasonal increase in remittances as the holiday season approaches.

The dollar experienced its second-steepest weekly decline against major currencies, with concerns rising about the global economic outlook. Cooler-than-expected US inflation data accelerated market expectations for a potential rate cut by the Federal Reserve in the first quarter of next year.

For the upcoming week, hawkish signals from the Bangko Sentral ng Pilipinas (BSP) could continue to bolster the peso. The BSP recently maintained benchmark interest rates, leaving the door open for further hikes if necessary. This decision follows a 25-basis-point off-cycle rate hike on October 26, marking the first policy meeting since then. The BSP has increased borrowing costs by a total of 450 basis points since it began its tightening cycle in May 2022. Deputy Governor Francisco G. Dakila, Jr. emphasized the readiness to resume hiking rates to ensure inflation returns to the 2-4% annual target. The Monetary Board will convene for its last meeting of the year on December 14.