Peso climbs vs dollar on BSP rate hike bets


THE PESO strengthened against the dollar on Thursday as faster April inflation raised bets that the local central bank would hike borrowing costs earlier than planned and after the widely expected 50-basis-point hike from the US Federal Reserve.

The local unit closed at P52.385 per dollar on Thursday, appreciating by 11.5 centavos from its P52.50 finish on Wednesday, data from the Bankers Association of the Philippines showed.

The peso opened Thursday’s session at P52.38 versus the dollar. Its weakest showing was at P52.425, while its intraday best was at P52.23 against the greenback.

Dollars exchanged fell to $907.5 million on Thursday from $1.339 billion on Wednesday.

“The peso strengthened after the stronger-than-expected Philippine inflation report bolstered expectations of a Bangko Sentral ng Pilipinas (BSP) rate hike within the quarter,” a trader said in an e-mail.

The Philippine Statistics Authority reported on Thursday that April inflation was at 4.9%, higher than the 4.1% in the same month in 2021 and faster than the 4% print in March.

BSP Governor Benjamin E. Diokno said in an interview with Bloomberg TV last week that the central bank may consider hiking key interest rates at its June 23 meeting.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the peso strengthened after the Fed hiked rates as expected.

He added that the peso was also stronger ahead of trade, import, export, and employment data due to be released on Friday.

The Fed on Wednesday raised its benchmark overnight interest rate by half a percentage point, the biggest jump in 22 years, Reuters reported. US Fed Chair Jerome H. Powell said policy makers were ready to approve half-percentage-point rate hikes at upcoming policy meetings in June and July.

In a news conference after the release of the Fed’s policy statement, Mr. Powell explicitly ruled out raising rates by three-quarters of a percentage point in a coming meeting, a comment that triggered a stock market rally.

The Fed also said it would start next month to reduce the roughly $9-trillion stash of assets accumulated during its efforts to fight the economic impact of the coronavirus pandemic as another lever to bring inflation under control.

For Friday, Mr. Ricafort and the trader said they expect the peso to move from P52.25 to P52.45 against the dollar. — T.J. Tomas with Reuters

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