Peso rises on bets of more BSP hikes

THE PESO strengthened against the dollar on Monday after the Bangko Sentral ng Pilipinas (BSP) signaled more rate hikes to come as it seeks to stem elevated inflation.

The local currency closed at P54.95 versus the greenback on Monday, appreciating by 29 centavos from Friday’s P55.24 finish, data from the Bankers Association of the Philippines showed.

The peso opened Monday’s trading session weaker at P55.31 per dollar. Its intraday best was its closing level of P54.95, while its worst showing was at P55.32 against the greenback.

Dollars traded went down to $717.4 million on Monday from $878.3 million on Friday.

“The peso appreciated following the impact of last week’s BSP monetary policy decision, wherein BSP Governor Medalla signaled at more local rate hikes this year,” a trader said in an e-mail.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also said in a Viber message that the central bank’s policy decision and signals of another rate increase next month supported the peso against the dollar.

The BSP on Thursday hiked benchmark interest rates by 50 basis points (bps) for a second straight meeting, bringing its policy rate to 6%, amid higher prices and rising inflation expectations.

BSP Governor Felipe M. Medalla said after the meeting that they could not rule out a third or fourth rate increase this year, and could deliver a 25-bp or 50-bp hike at their next review on March 23.

Mr. Ricafort added that the peso appreciated after global crude oil prices eased over the weekend.

Oil futures fell sharply on Friday amid signs of ample supply along with concerns of more US Federal Reserve hikes, which could weigh on demand.

US crude settled down 2.74% at $76.34 per barrel and Brent finished at $83.00, down 2.51%.

However, on Monday, Brent edged up 58 cents to $83.58 a barrel, while US crude rose 45 cents to $76.79.

For Tuesday, the trader said the peso could weaken anew against the dollar on expectations of improved US manufacturing data.

The trader and Mr. Ricafort expect the peso to trade between P54.85 and P55.10 per dollar on Tuesday. — A.M.C. Sy