Peso strengthens on hawkish BSP bets

The peso appreciated against the dollar on Thursday following expectations of a hawkish stance from the Bangko Sentral ng Pilipinas (BSP) after inflation quickened for a second straight month in September.

The local currency closed at PHP 56.67 versus the dollar on Thursday, strengthening by four centavos from Wednesday’s PHP 56.71 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Thursday’s session stronger at PHP 56.60 per dollar. Its intraday best was at PHP 56.59, while its weakest showing was at PHP 56.695 against the greenback.

Dollars traded went down to USD 1.23 billion on Thursday from the USD 1.53 billion on Wednesday.

The peso rose against the dollar on Thursday as faster-than-expected September inflation renewed hawkish BSP bets, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The peso appreciated as the stronger-than-expected domestic inflation spurred views of potential BSP rate hikes within the year,” a trader likewise said in an e-mail.

Headline inflation picked up a three-month high of 6.1% in September from 5.3% in August, data released by the Philippine Statistics Authority on Thursday showed.

This was slower than the 6.9% print in September 2022, but matched the high end of the BSP’s 5.3-6.1% forecast for the month.

The September consumer price index (CPI) was also above the 5.4% median estimate in a BusinessWorld poll of 17 analysts conducted last week and marked the 18th consecutive month that inflation ex-ceeded the 2-4% target for the year.

For the first nine months, the CPI averaged 6.6%, above the central bank’s 5.8% forecast for the year.

Following the data release, the BSP on Thursday said it “stands ready to resume monetary policy tightening as necessary to prevent the renewed broadening of price pressures.”

The BSP last month kept its policy rate unchanged at 6.25% for a fourth straight meeting after raising borrowing costs by 425 basis points from May 2022 to March 2023.

The central bank will hold its next policy meeting on Nov. 16. BSP Governor Eli M. Remolona, Jr. earlier said he is open to an off-cycle interest rate hike before next month’s review if inflation risks grow.

The peso also appreciated after the dollar weakened from 10-month highs further against other major currencies, Mr. Ricafort added.

For Friday, the trader said the peso could strengthen further against the dollar due to likely weak US nonfarm payrolls data.

The trader sees the peso moving between PHP 55.50 and PHP 55.75 per dollar on Friday, while Mr. Ricafort expects it to range from PHP 56.55 to PHP 56.75. — AMCS