THE PESO was mostly flat against the dollar on Wednesday before the US Federal Reserve’s policy decision announcement and amid rate-cut signals from local monetary authorities.
The local unit closed at P57.30 per dollar on Wednesday, weakening by half a centavo from its P57.295 finish on Tuesday, Bankers Association of the Philippines data showed.
The peso opened the session stronger at P57.25 against the dollar. Its worst showing was at P57.32, while its intraday best was at P57.17 versus the greenback.
Dollars traded climbed to $1.72 billion on Wednesday from $1.11 billion on Tuesday.
“The dollar-peso closed a tad lower, still on cautious trading ahead of the Federal Open Market Committee meeting. It initially went up to P57.17 on growing recession fears because of the recent weak data releases in the US and uncertainties over US President Donald J. Trump’s tariff policies,” a trader said in a phone interview.
The Fed will release its latest policy statement on Wednesday, where the central bank is widely expected to keep interest rates unchanged for a second straight meeting, along with its updated summary of economic projections, Reuters reported.
Markets are currently pricing in about 60 basis points (bps) of cuts from the Fed this year, although several US central bank officials have cautioned against the Fed moving too quickly on rates and said they would wait to see the impact of tariffs in economic data before making any policy shifts.
The market also digested fresh signals about the Bangko Sentral ng Pilipinas’ (BSP) next move, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
There is a “high probability” that the BSP will deliver a rate cut at its April 10 meeting, Finance Secretary Ralph G. Recto, who is also a Monetary Board member, told Bloomberg TV on Wednesday.
Mr. Recto added that the BSP could reduce benchmark borrowing costs by 50-75 bps this year, which could boost economic growth.
BSP Governor Eli M. Remolona, Jr. last week also said that a rate cut is “on the table” at the Monetary Board’s review next month.
Mr. Remolona said the Philippine central bank’s rate-cut cycle remains underway, signaling up to 50 bps in reductions for the year.
The BSP unexpectedly paused its easing cycle last month, keeping its policy rate at 5.75% after cutting rates by 25 bps for three straight meetings last year.
For Thursday, the trader expects the peso to move between P57.10 and P57.50 per dollar, while Mr. Ricafort sees it ranging from P57.20 to P57.40.
PESO LIKELY TO WEAKENThe peso could breach the weaker end of the Development Budget Coordination Committee’s (DBCC) assumptions in 2025 and 2026 with the Fed expected to conduct its easing cycle gradually, the BSP said in a report.
“The exchange rate is projected to settle above the DBCC’s assumptions for 2025 and 2026,” the central bank said in its latest Monetary Policy report.
The currency could be “influenced by a slower pace of monetary policy easing by the US Federal Reserve and recent exchange rate movements,” the BSP said.
“The baseline forecasts incorporate market expectations of a 50-bp reduction,” it added.
Under the DBCC’s macroeconomic assumptions, the peso is expected to range between P56 to P58 per dollar this year and from P55 to P58 in 2026.
ING Bank Regional Head of Research for Asia-Pacific Deepali Bhargava said the peso is seen to weaken further this year amid the dollar’s surge on safe-haven demand.
“We believe the US dollar is currently factoring in numerous negative elements, and the balance of risks for the coming weeks has shifted to the upside,” she said in a report.
“As we move into the second quarter and tariffs are implemented, we maintain a bullish outlook on the US dollar, anticipating a setback for global activity,” she said. “Concurrently, weaker external balances and real effective exchange rate overvaluation indicate that the Philippine peso is likely to depreciate against the US dollar in 2025,” she added.
ING forecasts the currency to weaken to P58 against the greenback next quarter.
The peso has been trading at the P57 range since late February amid the dollar’s recent slide due to US President Donald J. Trump’s tariff policies, which has raised concerns of a recession in the world’s largest economy.
“Since October 2024, the Philippines’ overall balance of payments has been deteriorating, marked by a widening current account deficit, weak foreign direct investment, and stagnant personal remittance inflows,” Ms. Bhargava said.
“Unlike some of its Asian peers, the Philippines has not significantly benefited from supply chain diversification and the China+1 strategy, particularly in the electronics sector, where countries like Vietnam, India, and Malaysia have gained global export market share,” she added. — Aaron Michael C. Sy and Luisa Maria Jacinta C. Jocson