Peso sinks to fresh 19-month low of 58.71:$1

FILE PHOTO

MANILA, Philippines — The peso sank to a fresh 19-month low of 58.71 against the greenback on Tuesday, ahead of the release of inflation data.

This was the currency’s weakest finish since the 58.80 versus the US dollar recorded on Nov. 3, 2022, and three centavos lower than the Monday close of 58.68 to the dollar, data from the Bankers Association of the Philippines showed.

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said, however, that the central bank was prepared to take necessary action once they find “some dysfunction” in the market that could burden the local currency.

READ: ‘Forceful’ BSP defense seen if peso slides to 58:$1

“We don’t worry too much about the level itself. We worry about how it gets to where it is going,” BSP chief Remolona told reporters on Tuesday.

Remolona also said that the central bank would let market forces dictate the level of the peso, but would attempt to “guide the market” by expressing their view on where it is likely headed.

Also, Remolona hinted at possible rate cuts of as much as 50 basis points (bps) this year and 100 bps next year, even if the US Federal Reserve will not cut its rates.

READ: Supercharged dollar sinks peso below 58

“The US Fed can cut rates in July depending on their inflation. We can also cut rates ahead of them (US Fed),” he said.

17-year high

At its May meeting, the Monetary Board kept its benchmark interest rate at a 17-year high of 6.5 percent. The BSP raised borrowing costs by a cumulative 450 bps from May 2022 to October 2023.

Meanwhile, the BSP chief said that cutting rates by 150 bps is “too aggressive” given the present growth trajectory.

READ: BSP hints at policy rate easing by August

Finance Secretary Ralph Recto announced last week that the BSP could cut key policy rates by as much as 150 bps in the next two years as it hopes for improved inflation data in the coming months.

The Development Budget Coordination Committee revised its 2025 growth target to 6.5-7.5 percent from 6.5-8 percent.

In a separate statement, GlobalSource Partners’ Philippines Analyst Diwa Guinigundo said that the central bank continued to be hawkish amid the upward trend of price pressures as well as the risks driving them.

“However, the market was jolted when the BSP issued some pronouncements a couple of days after that one, it had the flexibility to ease monetary policy before the US Fed action; two, a possible reduction in the policy rate as early as August; and three, the magnitude could be as much as 50 basis points (bps),” it said.