Peso up on BSP bets

The peso recovered against the dollar on Tuesday amid signals that the Bangko Sentral ng Pilipinas (BSP) may still cut rates this year.

The local unit closed at P56.32 per dollar on Tuesday, strengthening by seven centavos from its P56.39 finish on Monday, Bankers Association of the Philippines data showed.

The peso opened Tuesday’s session stronger at P56.30 against the dollar. Its weakest showing was at P56.35, while its intraday best was at P56.222 versus the greenback.

Dollars exchanged went down to $1.55 billion on Tuesday from $1.65 billion on Monday.

“The peso appreciated following the latest hawkish remark from Finance Secretary [Ralph G.] Recto of potentially two rate cuts from the BSP this year,” a trader said in an e-mail.

Mr. Recto, who sits on the Monetary Board, said the BSP may cut interest rates twice this year, or by a total of 50 basis points (bps). The central bank may end up reducing borrowing costs by up to 200 bps in the next two and a half years, he added.

The Monetary Board raised its policy rate by 450 bps from May 2022 to October 2023 to a near 17-year high of 6.5%.

It will next meet on April 8 to review policy.

The peso was also supported by a generally weaker dollar as markets await US gross domestic product and personal consumption expenditures price index data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Wednesday, the trader said the peso could strengthen further amid increased demand for cash ahead of the long weekend.

Philippine financial markets will be closed on Maundy Thursday and Good Friday.

The trader sees the peso moving between P56.15 and P56.40 per dollar on Wednesday, while Mr. Ricafort expects it to range from P56.20 to P56.40. — A.M.C. Sy