Philippine peso weakens as c. bank signals policy shift

The Philippine peso dipped to its lowest level against the US dollar since November 2022, reflecting a shift in the central bank’s monetary policy stance, the Nikkei Asia reported on Tuesday.

The peso weakened to 58.13 per dollar on Tuesday, surpassing the previous year’s low of 57.95 reached in April. This decline coincides with the Bangko Sentral ng Pilipinas (BSP) signalling a less hawkish approach to interest rates.

BSP governor Eli Remolona hinted at a potential rate cut by August, stating a more dovish stance after the central bank kept its key rate steady on Thursday.

While a weaker peso can be concerning, its impact on the Philippines is somewhat mitigated by the large number of overseas Filipino workers (OFWs) who send remittances back home in dollars.

The BSP revised its inflation forecast for 2024 downwards to 3.8 per cent from 4.0 per cent, while adjusting the 2025 projection upwards to 3.7 per cent from 3.5 per cent. Both figures remain within the bank’s target range of 2.0 per cent to 4.0 per cent.

Meanwhile, the dollar’s global strength added pressure to the peso. Recent comments from US Federal Reserve officials dampened hopes for a swift easing of US monetary policy.

The diminished expectation of Fed rate cuts has fuelled dollar buying among investors, leading to the peso’s depreciation. The Philippine peso reached its all-time low of 59.203 against the dollar on September 22nd, 2022.