THE PESO weakened anew against the dollar on Wednesday as investors awaited the Bangko Sentral ng Pilipinas’ (BSP) policy decision.
The local currency closed at P56.20 versus the dollar on Wednesday, declining 17 centavos from Tuesday’s P56.03 finish, data from the Bankers Association of the Philippines’ website showed.
This is the peso’s worst close in almost a month or since it finished at P56.21 on April 19.
The local unit opened Wednesday’s session sharply weaker at P56.15 per dollar. It traded lower than its Tuesday finish the entire day, with its best showing at P56.05 and its weakest point at P56.29 versus the greenback.
Dollars traded went up to $1.64 billion on Wednesday from the $1.295 billion recorded on Tuesday.
The peso was dragged down by expectations of a pause in the BSP’s tightening cycle at its meeting on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
BSP Governor Felipe M. Medalla said on Monday that the central bank is likely to leave its key interest rate unchanged, possibly hitting the pause button after its most aggressive tightening cycle in two decades, Bloomberg reported.
A pause is the “most likely result” at the May 18 meeting, he said on the sidelines of a forum of the central bank and the International Monetary Fund in Cebu on Monday.
The BSP has raised borrowing costs by 425 basis points (bps) since May 2022 to help bring down elevated inflation, bringing its policy rate to a 16-year high of 6.25%.
“The peso weakened anew after BSP Governor Medalla hinted at possibly reducing the local reserve requirement instead of policy rate cuts this year,” a trader added in an e-mail.
The BSP might reduce banks’ reserve requirement ratio (RRR) as an alternative to loosening monetary policy, Mr. Medalla said on Tuesday.
The RRR for big banks is currently at 12%, one of the highest in the region.
For Thursday, the trader said the peso could depreciate further due to caution ahead of the BSP policy decision.
Both the trader and Mr. Ricafort see the peso trading between P56.10 and P56.30 versus the dollar on Thursday. — A.M.C. Sy