Peso hits 3-week low ahead of BSP review

The peso dropped to a three-week low against the dollar on Wednesday before the Bangko Sentral ng Pilipinas’ (BSP) policy meeting, where it is expected to cut benchmark rates further.

The local unit closed at PHP 57.16 per dollar, down by nine centavos from its PHP 57.07 finish on Tuesday, Bankers Association of the Philippines data showed. This was the peso’s worst finish since it ended at PHP 57.475 on Aug. 6.

The peso opened the session stronger at PHP 56.93 against the dollar, which was also its intraday high. Meanwhile, it hit a low of PHP 57.23 against the greenback.

Dollars exchanged rose to USD 1.9 billion on Wednesday from USD 1.44 billion on Tuesday.

“The US dollar-peso exchange rate corrected slightly higher… partly due to the widely expected 25-basis-point (bp) BSP rate cut tomorrow (Aug. 28) that would bring the interest rate differential between BSP and Federal Reserve rates to 50 bps, the narrowest on record,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort via Viber.

The peso weakened as “dollar demand was fueled by reports saying that Fed Governor Lisa Cook filed a lawsuit that challenged her removal from office,” a trader said by phone.

For Thursday, the trader sees the peso moving between PHP 56.90 and PHP 57.30 per dollar, while Mr. Ricafort expects it to range from PHP 57 to PHP 57.25. — A.M.C. Sy