Peso to stay at PHP56 level ahead of PH GDP data

The peso is expected to remain at the PHP 56-per-dollar level this week as the market awaits the release of Philippine gross domestic product (GDP) data and the US Federal Reserve’s policy decision.

The local unit closed at PHP 56.29 per dollar on Friday, strengthening by 24 centavos from its PHp 56.53 finish on Thursday, Bankers Association of the Philippines data showed.

Week on week, the peso weakened by 32 centavos from its PHP 55.97 finish on Jan. 19.

The peso opened Friday’s session at PHP 56.50 against the dollar. Its intraday best was at PHP 56.29, while its weakest showing was at PHP 56.54 versus the greenback.

Dollars exchanged went down to USD 1.38 billion on Friday from USD 1.47 billion on Thursday.

The peso strengthened against the dollar on Friday amid hawkish signals from the Bangko Sentral ng Pilipinas (BSP) chief, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

BSP Governor Eli M. Remolona, Jr. said last week that the central bank is unlikely to cut rates at its Feb. 15 meeting amid lingering risks to inflation.

“At this point, a rate cut is not likely (on) Feb. 15,” Mr. Remolona said in mixed English and Filipino, adding that the “numbers we are seeing” show the need to keep policy settings sufficiently tight for some time.   

The Monetary Board hiked borrowing costs by 450 basis points (bps) from May 2022 to October 2023, bringing the key interest rate to a 16-year high of 6.5%.

“[The peso-dollar] pair was supported on dips today, following the robust US GDP data overnight,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message on Friday.

The US economy grew faster than expected in the fourth quarter amid strong consumer spending, and shrugged off dire predictions of a recession after the Federal Reserve aggressively raised interest rates, with growth for the full year coming in at 2.5%, Reuters reported.

Gross domestic product increased at a 3.3% annualized rate last quarter after advancing at a 4.9% pace in the third quarter, the Commerce Department’s Bureau of Economic Analysis said.

Economists polled by Reuters had forecast GDP rising at a 2.0% rate. Estimates ranged from a 0.8% rate to a 2.8% pace. The economy is expanding at a pace above what Fed officials regard as the non-inflationary growth rate of 1.8%.

Growth last year accelerated from 1.9% in 2022, and was the fastest in two years. From the fourth quarter of 2022 through the fourth quarter of 2023, the economy grew 3.1%, blowing away economists’ estimates for a 0.1% contraction back in December 2022.

For this week, the peso could stay at the PHP 56 level as the market awaits the release of fourth quarter and full-year 2023 Philippine GDP data, Mr. Roces said.

Philippine economic growth likely slowed in the fourth quarter of 2023 to bring the full-year expansion below the government’s target, analysts polled by BusinessWorld said.

GDP likely grew by 5.7% in the fourth quarter of 2023, based on the median estimate of 20 economists polled by BusinessWorld.

This would be slower than the 5.9% growth logged in the third quarter of 2023 and the 7.1% expansion seen in the same period in 2022.

For 2023, GDP growth may have averaged 5.5%, short of the government’s 6-7% target. This would be well below the 7.6% expansion in 2022.

The market will also await the Fed’s policy decision this week, Mr. Ricafort added.

The US central bank is widely expected to keep the fed funds rate steady at the 5.25-5.5% range during its Jan. 30-31 meeting.

The Federal Open Market Committee raised borrowing costs by a total of 525 bps from March 2022 to July 2023.

Mr. Roces expects the peso to move between PHP 56.20 and PHP 56.80 per dollar this week, while Mr. Ricafort sees it ranging from PHP 56 to PHP 56.50 against the greenback. — A.M.C. Sy with Reuters