Peso edges up before Fed, BSP decisions

THE PESO inched up against the dollar on Wednesday as investors await the policy decisions of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

The local unit gained a centavo to close at P59.21 versus the greenback from its record-low finish of P59.22 on Tuesday, data from the Bankers Association of the Philippines data showed.

The peso opened Wednesday’s trading session weaker at P59.25 versus the dollar, which was also its intraday low. Meanwhile, it climbed to its strongest at P59.16 against the greenback.

Dollars traded rose to $1.29 billion from $1.097 billion on Tuesday.

“The peso moved almost flat amid market uncertainty ahead of the Fed and BSP policy decisions tomorrow,” a trader said in a Viber message.

The Fed was set to announce its policy decision overnight. A second straight 25-basis-point (bp) cut is largely priced in, but markets will monitor the statement of Fed Chair Jerome H. Powell for clues on the central bank’s future policy path.

Meanwhile, a BusinessWorld poll showed that 17 of 18 analysts expect the Monetary Board to deliver a fifth straight 25-bp reduction at its meeting on Thursday to bring the policy rate to 4.5%, the lowest since September 2022. One analyst sees an outsized 50-bp cut.

The BSP has lowered benchmark rates by a total of 175 bps since it began its easing cycle in August 2024.

The peso was also supported by lower global crude oil prices as well as the seasonal increase in remittances amid the holiday season, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Thursday, the trader said the peso could appreciate in the morning session in reaction to the Fed’s statement, but weaken again once the BSP announces its own decision.

The trader sees the peso moving between P59.10 and P59.30 per dollar, while Mr. Ricafort expects it to range from P59.05 to P59.25.

Oikonomia Advisory and Research, Inc. economist Reinielle Matt M. Erece said in a Viber message that the central bank could step in to prevent the peso from sinking to the P60 level to support consumer and business senti-ment.

“The central bank may employ measures such as the outflow of reserves to prop up the peso. Moreover, the holiday season may continue to support the domestic currency, preventing it from slipping too much,” he added.

BSP Governor Eli M. Remolona, Jr. has said that the central bank would only intervene in the foreign exchange market if the peso’s prolonged depreciation becomes inflationary. — A.M.C. Sy