Peso likely range-bound as market eyes BSP meet

The peso may move sideways against the dollar this week before an expected rate cut by the Bangko Sentral ng Pilipinas (BSP) and following the release of softer-than-expected US inflation data.

On Friday, the local unit closed at PHP 58.02 per dollar, rising by 9.5 centavos from its PHP 58.115 finish on Thursday, data from the Bankers Association of the Philippines showed.

This was the peso’s strongest finish in more than four months or since it ended at PHP 57.95 on Oct. 8, 2025.

Week on week, the peso surged by 56.5 centavos from its PHP 58.585 close on Feb. 06.

The local currency strengthened on Friday as the dollar stayed weak and with players positioning before the BSP’s policy meeting as the central bank is close to ending its current easing cycle, a trader said by phone.

All 16 analysts surveyed in a BusinessWorld poll conducted last week expect the Monetary Board to reduce the target reverse repurchase by 25 basis points (bps) for the sixth straight time at its first meeting of the year on Thursday (Feb. 19) to bring the policy rate to 4.25%.

The peso rose along with regional currencies on Friday, buoyed mainly by a stronger yen, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The yen was set for its strongest weekly gain in a year on Friday, after Japanese Prime Minister Sanae Takaichi’s historic election win allayed some investor worries about the government’s finances, Reuters reported.

On Friday, the yen traded on a weaker footing, leaving the dollar 0.5% higher at 153.46, but it was still headed for a gain of 2.4% for the week, its largest rise since February last year.

For this week, the trader said the peso could weaken ahead of the BSP’s expected rate cut, with the US inflation report released on Friday also expected to dictate the market’s direction to start this week’s trading.

The trader sees the peso moving between PHP 57.80 and PHP 58.20 per dollar this week, while Mr. Ricafort expects it to range from PHP 57.70 to PHP 58.25.

US consumer prices increased less than expected in January amid cheaper gasoline and a moderation in rental inflation, but households faced higher costs for services, suggesting little urgency for the Federal Reserve to resume cutting interest rates before summer, Reuters reported.

The report followed on the heels of news last week of an acceleration in job growth in January and a drop in the unemployment rate to 4.3% from 4.4% in December.

The consumer price index (CPI) rose 0.2% last month after an unrevised 0.3% gain in December, the Labor Department’s Bureau of Labor Statistics (BLS) said.

Economists polled by Reuters had forecast the CPI increasing 0.3%. With January’s CPI report, the BLS published recalculated seasonal adjustment factors to reflect 2025 price movements.

The report was slightly delayed by a three-day shutdown of the federal government. Some economists attributed January’s favorable headline reading to the volatility in the CPI data caused by last year’s longer shutdown that prevented the collection of prices for October.

In the 12 months through January, the CPI increased 2.4%. The slowdown in the year-on-year inflation rate from 2.7% in December mostly reflected last year’s higher readings dropping out of the calculation. The tamer inflation numbers were unlikely to resonate with consumers.

Financial markets raised the odds of a June rate cut. The Fed last month left its benchmark overnight interest rate in the 3.5%-3.75% range.

The Fed tracks the personal consumption expenditures (PCE) price indexes for its 2% inflation target. Both measures are running well above target. Based on the CPI data, economists’ estimates for the January increase in core PCE inflation ranged from 0.2% to 0.5%. Year-on-year estimates for January core PCE inflation were between an increase of 2.9% and 3.2%. The government will publish December PCE inflation data this week. — A.M.C. Sy with Reuters