Peso rises as BSP hints at rate hike

The peso appreciated against the dollar on Wednesday after Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. said they could hike benchmark rates next month.

The local currency closed at PHP 56.755 versus the dollar on Wednesday, strengthening by 6.50 centavos from Tuesday’s PHP 56.82 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Wednesday’s session at PHP 56.75 per dollar. Its intraday best was at P56.705, while its weakest showing was at PHP 56.777 against the greenback.

Dollars traded went up to USD 1.19 billion on Wednesday from the USD 1.05 billion on Tuesday.

The peso strengthened against the dollar on Wednesday after the central bank chief signaled that a 25-basis-point (bp) rate hike could be on the table at their Nov. 16 meeting, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The peso strengthened after BSP Governor Remolona hinted at a further policy rate hike before yearend,” a trader likewise said in an e-mail.

Mr. Remonola on Wednesday said the Monetary Board is open to hiking borrowing costs by 25 bps in their Nov. 16 review following the release of data showing faster-than-expected September inflation.

The Monetary Board has kept the benchmark interest rate at 6.25% for four straight meetings after it hiked borrowing costs by 425 bps from May 2022 to March 2023 to help tame inflation.

The peso was also supported by the recent downward correction in the dollar due to dovish signals from US Federal Reserve officials, Mr. Ricafort added.

The dollar was largely rangebound on Wednesday, though remained weighed down by dovish US Federal Reserve comments, as traders awaited the central bank’s policy meeting minutes due later in the day for more clues on its interest rate outlook, Reuters reported.

A slew of Fed officials have signaled in recent days that the US central bank may not need to tighten monetary policy much further than initially thought.

Atlanta Fed Bank President Raphael Bostic said on Tuesday the central bank did not need to raise borrowing costs any further, and Minneapolis Fed President Neel Kashkari followed with similar remarks later in the day.

The greenback sat near a two-week low against a basket of currencies on Wednesday and last stood at 105.80.

For Thursday, the trader said peso could depreciate due to expectations of an uptick in US consumer inflation.

The trader sees the peso moving between PHP 56.65 and PHP 56.90 per dollar on Thursday, while Mr. Ricafort expects it to range from PHP 56.65 to PHP 56.85. — AMCS with Reuters