THE PESO may strengthen further against the dollar this week ahead of a scheduled speech from the US Federal Reserve chief and key US economic data.
The local unit closed at P55.25 per dollar on Friday, jumping by 33.5 centavos from its P55.585 finish on Thursday, Bankers Association of the Philippines data showed.
This was the peso’s strongest finish in almost 22 months or since its P55.19 close on Aug. 2, 2023.
Week on week, the peso gained by 38.5 centavos from its P55.635-per-dollar close on May 16.
The peso’s surge on Friday was supported by the latest rate cut signals from the Bangko Sentral ng Pilipinas (BSP), Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“This can be attributed to a combination of positive sentiment from the US-China tariff truce, some dovish cues from the BSP and soft inflation data, which helped temper expectations of further tightening,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera likewise said in a Viber message on Friday.
BSP Governor Eli M. Remolona, Jr. said on Friday that the Monetary Board could cut rates two more times this year, with the next reduction on the table as early as next month.
“Maybe two more cuts. Not necessarily consecutive. Still 25 basis points (bps) at a time, given what we know about what’s going on,” Mr. Remolona said. “The hard part is we don’t know. It’s new territory for most central banks. That’s the most uncomfortable part.”
He said easing inflation gives them “plenty of room” to cut, although they don’t want to cut “too much” as this could stoke prices anew.
The Monetary Board in April cut benchmark interest rates by 25 bps to bring the policy rate to 5.5%. It has now lowered borrowing costs by a cumulative 100 bps since beginning its easing cycle in August last year.
There are four remaining Monetary Board policy meetings this year scheduled for June, August, October and December.
For this week, Mr. Ricafort said the peso could maintain its strength ahead of a scheduled speech by Fed Chair Jerome H. Powell overnight and the release of the minutes of the Fed’s April meeting on Wednesday.
The release of the latest estimate for first-quarter US gross domestic product and the personal consumption expenditure price index on Thursday could also drive peso-dollar trading this week.
“Key factors to watch would be global market mood post-US tariff truce, upcoming US inflation and jobs data, and local follow-through from April inflation and hints from the BSP on the pace of easing,” Mr. Rivera added.
Mr. Ricafort sees the peso moving between P55 and P55.50 per dollar this week, while Mr. Rivera said it could stay at the P55 level with a slight strengthening bias. — Aaron Michael C. Sy