Peso weakens on rate cut talk

The peso weakened against the dollar on Tuesday after the Finance chief reiterated that the Bangko Sentral ng Pilipinas (BSP) would cut benchmark interest rates within the year.

The local unit closed at PHP 58.435 per dollar on Tuesday, dropping by 5.5 centavos from its PHP 58.38 finish on Monday, Bankers Association of the Philippines data showed.

The peso opened Tuesday’s session lower at PHP 58.44 against the dollar. Its intraday best was at PHP 58.30, while its weakest showing was at PHP 58.46 versus the greenback.

Dollars traded climbed to USD 1.15 billion on Tuesday from USD 858.75 million on Monday.

“Most Asian currencies rose against the dollar as US yields slipped, but the peso lagged behind its Asian peers as Finance Secretary Ralph G. Recto signaled a preference for a rate cut in August,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

Mr. Recto, who is also a member of the central bank’s Monetary Board, said on Tuesday the country is on track for a cut in policy rates this year due to easing inflation, though the timing would be up to the central bank.

The central bank, which has kept interest rates steady at 6.5% in its last six meetings, has previously flagged a possible cut of 25 basis points (bps) at its Aug. 15 meeting as its sees inflation easing in the second half.

BSP Governor Eli M. Remolona, Jr. last month said the Monetary Board could reduce borrowing costs by 25 bps in the third quarter and by another 25 bps in the fourth quarter.

The peso was also dragged down by a steady dollar on Tuesday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

World markets steadied on Tuesday as investors looked beyond Joseph R. Biden’s exit from the US presidential race, turning their focus to corporate earnings and economic data, Reuters reported.

The US dollar, which had edged higher on Monday, was unchanged against a basket of currencies on Tuesday.

For Wednesday, Mr. Ricafort sees the peso ranging from PHP 58.30 to PHP 58.50 per dollar. — AMCS with Reuters