Peso strengthens after hawkish comments from BSP governor

THE PHILIPPINE peso strengthened against the dollar on Wednesday after hawkish comments from the central bank governor.

It closed at P55.87 a dollar, eight centavos stronger than Tuesday, according to data posted on the Bankers Association of the Philippines website.

The peso opened at P55.93, which was also its weakest showing. It appreciated to as much as P55.85 against the greenback.

Dollars exchanged went up to $905.5 million from $821.65 million on Tuesday.

The peso was supported by hawkish signals from the central bank, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

“The peso also strengthened after the gauge of the US dollar versus major global currencies slightly eased further to new one-month lows,” he added.

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. on Wednesday said it was too soon to declare victory against inflation.

Inflation quickened to 3.4% last month from 2.8% in January and 8.6% a year ago. It was above the 3% median estimate in a BusinessWorld poll of 16 analysts last week but within the central bank’s 2.8-3.6% forecast.

This was the first time that inflation picked up month on month since September.

For the first two months, it averaged 3.1%, within the BSP’s 2-4% annual target.

“I can’t say that we’re going to ease soon,” Mr. Remolona said at a media briefing. “It’s unlikely that we will tighten it some more, but we’ll see what the data say.”

The Monetary Board raised its benchmark interest rate by 450 basis points to a near 17-year high of 6.5% from May 2022 to October 2023.

“The peso strengthened as the softer US service report for February raised concerns about the health of the US economy,” a trader said in an e-mail.

The growth slowed in February amid a decline in employment, but a measure of new orders increased to a six-month high, pointing to underlying strength in the sector, Reuters reported.

The Institute for Supply Management (ISM) said its nonmanufacturing Purchasing Managers’ Index (PMI) slipped to 52.6 last month from 53.4 in January.

A reading above 50 indicates growth in the service industry, which accounts for more than two-thirds of the US economy. Economists polled by Reuters had forecast the index to be little changed at 53.

The trader expects the peso to weaken to Thursday due to some caution ahead of US Federal Reserve Chairman Jerome H. Powell’s testimony before the US House of Representatives.

The trader sees the peso to trade from P55.75 to P56 a dollar, while Mr. Ricafort expects it at P55.80 to P56.