Peso to move sideways before BSP, Fed

THE PESO could trade sideways against the dollar this week ahead of the policy meetings of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

The local unit closed at PHP 55.30 per dollar on Thursday, inching up by less than a centavo from its PHP 55.305 finish on Wednesday.

Week on week, the peso appreciated by 10 centavos from its PHP 55.40 close on Dec. 1. The market was closed on Friday for a nonworking day.

For this week, the peso is seen to take its cue from the policy meetings of the Fed and the BSP, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

Markets expect the Fed to pause at this week’s meeting, with the BSP likely to follow suit, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Federal Open Market Committee will hold its final review for the year on Dec. 12-13, while the BSP’s Monetary Board will meet to discuss policy on Dec. 14.

The Fed has hiked its target rate by a cumulative 525 basis points (bps) to the 5.25%-5.5% range since it began its tightening cycle in March 2022.

While the Fed is expected to keep rates steady on Wednesday for a third straight meeting, investors will watch for signs from policymakers that confirm the market’s view for rate cuts as early as March 2024. The Fed will also release its summary of economic projections, which will show officials’ rate expectations for next year, Reuters reported.

Meanwhile, the BSP has raised benchmark interest rates by a cumulative 450 bps since May 2022 to help bring down inflation, with its policy rate now at a 16-year high of 6.5%.

A BusinessWorld poll last week showed 15 out of 17 analysts expect the Monetary Board to keep its target reverse repurchase rate steady on Thursday, with the BSP remaining vigilant amid lingering upside risks to prices despite easing inflation recently.

Mr. Roces expects the peso to move between PHP 55.30 and PHP 55.60 per dollar this week, while Mr. Ricafort sees it ranging from PHP 55 to PHP 55.50. — AMCS with Reuters