Peso climbs to one-month high on expectations of big BSP rate hike

THE PESO strengthened to a one-month high against the dollar on Wednesday after the Bangko Sentral ng Pilipinas (BSP) said it could match the US Federal Reserve’s tightening point by point.

The local unit closed at P58.43 per dollar on Wednesday, gaining 35 centavos from its P58.78 finish on Tuesday, based on Bankers Association of the Philippines data.

This is the peso’s best close in over a month or since it finished at P58.49 a dollar on Sept. 22.

The peso opened Wednesday’s session at P58.65 per dollar. Its weakest showing was at P58.72, while its intraday best was at its close of P58.43 against the greenback.

Dollars exchanged increased to $845.5 million on Wednesday from $561 million on Tuesday.

“The peso appreciated after BSP Governor Medalla noted that the local policy rate increase will likely match the US Fed’s adjustment next week,” a trader said in an e-mail.

BSP Governor Felipe M. Medalla on Tuesday said the central bank could match the Fed’s rate hikes point by point to support the peso and prevent its depreciation from adding to inflation risks.

He said the Monetary Board may raise benchmark interest rates by 75 basis points (bps) at their Nov. 17 meeting if the Fed delivers a hike of the same magnitude at their Nov. 1-2 review.

The BSP has hiked benchmark rates by 225 bps since May, while the Fed has raised borrowing costs by 300 bps since March.

The peso also strengthened ahead of the trading break next week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Mr. Ricafort said the holidays could cause an increase of remittances from overseas Filipino workers to finance their families’ spending.

“The peso was also stronger after local stock market gauge … gained for the third straight day … partly in line with the continued overnight gains in the US stock markets [and] also after narrower budget deficit data,” he added.

For Thursday, the trader said the peso may continue to strengthen ahead of a likely weak US new home sales report overnight.

The trader sees the peso moving between P58.35 and P58.55 on Thursday, while Mr. Ricafort gave a forecast range of P58.25 to P58.55 per dollar. — KBT