Peso may weaken vs dollar on RRR announcement

The peso may weaken against the dollar this week after the Bangko Sentral ng Pilipinas (BSP) said it will bring down banks’ reserve requirement ratios (RRR) by March.

The local unit closed unchanged at PHP 57.94 per dollar on Friday, Bankers Association of the Philippines data showed.

Week on week, the peso weakened by 11 centavos from its PHP 57.83 finish on Feb. 14.

The dollar was generally weaker early on Friday after US President Donald J. Trump hinted at a possible trade deal with China. Rizal Commercial Banking Corp. Michael L. Ricafort said in a Viber message. The greenback eventually rebounded later in the session.

The peso was initially stronger against the dollar on Friday following Mr. Trump’s comments on China, a trader likewise said, but weakened after the BSP’s announcement of the RRR cuts.

“For [this] week, we may see some spillover peso weakness following the RRR cut announcement, on trade developments, and if the US Federal Reserve continues to send out hawkish signals,” the trader said in a phone interview.

The trader said the peso could move between PHP 57.80 and PHP 58.30 against the dollar this week, while Mr. Ricafort sees it ranging from PHP 57.70 to PHP 58.20.

The BSP on Friday said it will reduce the reserve requirement ratios for universal and commercial banks and nonbank financial institutions with quasi-banking functions by 200 basis points (bps) to 5% from 7% effective March 28.

The RRR for digital banks will be cut by 150 bps to 2.5%, while that for thrift banks will be slashed by 100 bps to 0%.

The central bank last cut banks’ reserve ratios in October 2024.

“The BSP reiterates its long-run goal of enabling banks to channel their funds more effectively toward productive loans and investments. Reducing RRRs will lessen frictions that hinder financial intermediation,” it said.

Meanwhile, the US dollar rose against a broad range of currencies on Friday, partly retracing losses versus the yen as investors consolidated positions ahead of the weekend, looked to more inflation data next week, and kept an eye on tariff headlines, Reuters reported.

In late morning trading, the dollar was last flat on the day against the yen at 149.58 yen. It has fallen in five of the last six weeks, and was down 1.8% on the week.

Also weighing on the dollar was the more-than-expected drop in the US consumer sentiment index to a 15-month low. At the same time, inflation expectations surged as households worried about Mr. Trump’s steep and broad-based tariffs and their impact on their purchasing power.

The dollar index was last up 0.3% at 106.68.

Mr. Trump last week unveiled plans for tariffs on lumber imports, but also said a new trade deal with China was possible. — A.M.C. Sy with Reuters