THE PESO on Tuesday sank to the P56-per-dollar level for the first time in almost two weeks after Finance Secretary Ralph G. Recto said the Bangko Sentral ng Pilipinas (BSP) has space for a big rate cut following the US central bank’s move last week.
The local unit closed at P56.245 per dollar on Tuesday, falling by 27.5 centavos from its P55.97 finish on Monday, Bankers Association of the Philippines data showed.
Tuesday’s close was the peso’s worst showing in two weeks or since it ended at P56.385 against the dollar on Sept. 10. This was also the first time the local unit finished at the P56 level since Sept. 12’s P56.20.
The peso opened Tuesday’s session weaker at P56.05 against the dollar. Its intraday best was at P55.97, while its worst showing was at P56.33 versus the greenback.
Dollars exchanged rose to $1.8 billion on Tuesday from $1.39 billion on Monday.
The peso dropped after the dollar rallied overnight and following dovish signals from Mr. Recto, a trader said by phone.
Mr. Recto, who sits on the central bank’s Monetary Board, said on Tuesday the monetary authority can afford to slash interest rates further and match the size of the US Federal Reserve’s rate cut, Reuters reported.
“The Fed reduced by 50 basis points (bps). I think we can also do half a percent,” Mr. Recto a told a media briefing.
Inflation would likely ease to 2.5% in September, he said, the slowest in nearly four years, after rising at an annual pace of 3.3% the previous month. Mr. Recto said that could settle at 3.4% this year, within the central bank’s 2% to 4% target range.
Slowing inflation allowed the central bank to cut its benchmark borrowing rate by 25 bps to 6.25% in August, its first rate cut since November 2020, ahead of major central banks, including the Fed.
The Fed started cutting rates on Sept. 18 with a larger-than-usual half-percentage-point reduction, which will likely be followed by a 25-bp cut in both November and December, according to a Reuters poll.
BSP Governor Eli M. Remolona, Jr. had earlier flagged there was room for one more interest rate cut this year. The BSP’s next meeting is on Oct. 17.
The peso was also dragged down by higher global crude oil prices and US Treasury yields amid renewed geopolitical tensions in the Middle East, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
For Wednesday, the trader sees the peso moving between P55.90 and P56.40 per dollar, while Mr. Ricafort expects it to range from P56.15 to P56.35. — AMCS with Reuters