Peso may trade sideways ahead of BSP meeting

The peso may trade sideways against the dollar this week as the market expects the Bangko Sentral ng Pilipinas (BSP) to hold its key rate unchanged at its Nov. 16 meeting.

The local unit closed at PHP 55.96 per dollar on Friday, weakening by seven centavos from its PHP 55.89 finish on Thursday, based on Bankers Association of the Philippines data.

Week on week, it gained 14 centavos from its PHP 56.10 close on Nov. 3.

The peso opened Friday’s session at PHP 56.03 against the dollar, which was also its weakest showing. Its intraday best was at PHP 55.92 versus the greenback.

Dollars exchanged went down to USD 951.7 million on Friday from USD 1.33 billion on Thursday.

The peso weakened against the dollar on Friday after Fed Chair Jerome H. Powell said the US central bank will continue to move carefully and will not hesitate to raise rates when needed, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“[The] peso weakened following hawkish remarks from Fed Chair Powell,” Security Bank Corp. Chief Economist Robert Dan J. Roces likewise said in a Viber message.

The Fed kept its benchmark interest rate steady at the 5.25%-5.5% range for a second straight time during its Oct. 31-Nov. 1 meeting.

It has hiked rates by a cumulative 525 basis points (bps) since it began its tightening cycle in March last year.

The US central bank will next meet on Dec. 12-13 to review policy.

Mr. Ricafort said the hawkish signals from Mr. Powell resulted in a generally stronger dollar and higher US Treasury yields on Friday.

For this week, the peso could move sideways but will depend on the BSP’s move at its Nov. 16 meeting, Mr. Roces said.

The BSP is widely expected to match the Fed’s move last week, Mr. Ricafort noted.

The Monetary Board implemented an off-cycle 25-bp rate hike on Oct. 26, ahead of its Nov. 16 meeting, bringing its benchmark policy rate to 6.5%.

It has raised interest rates by 450 bps since May 2022 to temper inflation.

Mr. Roces expects the peso to move between PHP 56.60 and PHP 56 per dollar this week, while Mr. Ricafort sees it ranging from PHP 55.70 to PHP 56.20. — Aaron Michael C. Sy