The Philippine peso is expected to stabilize between 55 to 56 against the greenback ahead of the expected pause in the Federal Reserve’s rate hiking cycle and continuation of the same decision for the Bangko Sentral ng Pilipinas (BSP) this month.
In a report, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said the local currency has eased to among its one-week lows since 2022 when it ended last week’s trading at 56.05.
“(It) could stabilize at 55.00-56.00 levels,” he said, weaker than the 53 to 54 he forecasts as floor levels earlier in the year.
Ricafort said the next resistance level for the local unit is around 56.30 while the major resistance level is around 56.35 to 56.95.
He said this range “need(s) to be protected vs. further upside or risk of higher inflation.”
Ricafort said among the factors seen to drive the foreign exchange market this week is the rate decision of the Federal Reserve which is expected to maintain its key rates after the meeting of the Federal Open Market Committee (FOMC) on June 13-14.
Another driver is the possible continuation of the BSP’s policy-making Monetary Board’s (MB) decision to again keep the central bank’s key rates steady, similar to its decision last month, as domestic inflation continues to decelerate.
Inflation rate last May slowed further to 6.1 percent from month-ago’s 6.6 percent and monetary authorities project the monthly figure returning to within the government’s 2 to 4 percent target band in the last quarter of this year.
Despite the projected pause in the rate hiking decisions of both the Fed and the BSP, Ricafort said “the markets recently priced in a possible +0.25 Fed rate hike on July 26, 2023, as also signaled earlier by some Fed officials; as any future Fed rate moves (pause or hike) could be matched locally to maintain healthy interest rate differential at +1.00 to also help stabilize the peso exchange rate and overall inflation.” PNA
