Peso climbs to near one-month high vs dollar

The peso strengthened to a near one-month high against the dollar on Monday as the Bangko Sentral ng Pilipinas (BSP) is expected to keep its benchmark rates steady this week following a similar decision by the US Federal Reserve.

The local currency closed at PHP 55.74 versus the dollar on Monday, up by 12 centavos from Friday’s PHP 55.86 finish, data from the Bankers Association of the Philippines’ website showed.

This was the peso’s strongest close since its PHP 55.725-per-dollar finish on May 23.

The local unit opened Monday’s session at PHP 55.845 per dollar. Its weakest showing was at PHP 55.97, while its intraday best was at PHP 55.70 against the greenback.

Dollars traded rose to USD 1.11 billion on Monday from the USD 969.15 million seen on Friday.

Expectations of a continued pause from the BSP following the Fed’s decision last week boosted the peso, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Fed decided to keep its target interest rate steady at 5-5.25% during its June 13-14 meeting, the first pause after it hiked borrowing costs by a total of 500 basis points (bps) for 10 straight meetings since March last year.

Meanwhile, the BSP is expected to keep benchmark interest rates steady for a second straight meeting on Thursday, as 15 economists in a BusinessWorld poll all expect the Monetary Board to maintain the overnight repurchase rate at 6.25% this week.

If realized, this would be the second straight meeting the BSP will leave interest rates untouched. The central bank had raised borrowing costs by 425 basis points from May 2022 to March 2023 to help bring inflation down.

“The peso appreciated after the BSP projected an improved balance of payments (BoP) for the year,” a trader said in an e-mail.

The BSP last week said it expects the country’s BoP position to end the year at a deficit of USD 1.2 billion, or -0.3% of gross domestic product (GDP), down from the $1.6 billion (-1.3% of GDP) forecast given in March.

For Tuesday, the trader said the peso could strengthen further against the dollar as the market awaits the BSP’s policy meeting.

The trader sees the peso moving between PHP 55.60 and PHP 55.85 per dollar on Tuesday, while Mr. Ricafort expects it to trade from PHP 55.65 to PHP 55.85. — A.M.C. Sy