Peso sinks as BSP chief says weak growth may lead to another rate cut
THE PESO slid to a near two-week low against the dollar on Wednesday as the Bangko Sentral ng Pilipinas (BSP) chief said they expect economic growth to miss the government’s target this year, which could give them a reason to cut rates again next week.
The local unit closed at P58.92 per dollar, sinking by 39.9 centavos from its P58.521 finish on Tuesday, Bankers Association of the Philippines data showed.
This was the peso’s weakest close in nearly two weeks or since it finished at P59.065 on Nov. 20.
The peso opened Wednesday session just slightly weaker at P58.55 against the dollar. It reached an intraday high of P58.50, while its worst showing was at P58.925 against the greenback.
Dollars exchanged climbed to $1.41 billion from $1.49 billion on Tuesday.
“(T)he dollar-peso closed higher today on BSP Chief Remolona’s comments that the Philippines may not hit this year’s GDP target,” a trader said in a phone interview. “In addition, he also said that the outlook raises odds for the BSP to cut rates this December.”
BSP Governor Eli M. Remolona, Jr. on Wednesday said that Philippine gross domestic product (GDP) growth may only settle between 4% and 5% this year as the corruption scandal continues to limit government spending and weaken investor sentiment.
This would be well below the government’s full-year growth target of 5.5% to 6.5%.
Mr. Remolona said this raises the chances of a fifth straight rate cut at the Monetary Board’s Dec. 11 meeting.
In October, the central bank lowered borrowing costs by 25 basis points (bps) for a fourth meeting in a row to bring the policy rate to 4.75%.
It has reduced benchmark rates by a total of 175 bps since it began its easing cycle in August 2024.
For Thursday, the trader said the release of US economic data could provide some relief for the peso, with consolidation also likely as the local unit moves closer to the P59 level again.
The trader sees the peso moving between P58.80 and P59.10 per dollar, while Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort expects it to range from P58.80 to P59.05. — Katherine K. Chan
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