THE PESO sank back to the P58 level against the dollar on Thursday after the Bangko Sentral ng Pilipinas (BSP) unexpectedly lowered borrowing costs at its policy meeting.
The local unit fell by 28.5 centavos to close at P58.235 versus the greenback from its P57.95 finish on Wednesday, Bankers Association of the Philippines data showed.
Year to date, it is down by 39 centavos from its end-2024 close of P57.845.
The peso opened Thursday’s session stronger at P57.875 versus the dollar. Its intraday best was at P57.79, while its worst showing was at P58.32 against the greenback.
Dollars exchanged went down to $1.92 billion on Thursday from $2.03 billion on Wednesday.
“The dollar-peso closed higher after the surprise cut from BSP due to a softer outlook for the Philippines amid the ongoing graft corruption scandal,” a trader said in a phone interview.
On Thursday, the BSP’s policy-setting Monetary Board delivered its fourth straight 25-basis-point (bp) cut to bring the target repurchase rate to 4.75%, the lowest since September 2022. Only six of the 16 analysts polled by BusinessWold expected a reduction at this week’s meeting.
The central bank has now lowered borrowing costs by a total of 175 bps since it began its easing cycle in August 2024.
BSP Governor Eli M. Remolona, Jr. said that they cut rates as the widening corruption scandal involving state flood control and infrastructure projects has affected business sentiment, and, in turn, the outlook for the economy.
“As the extent of the issues related to infrastructure spending became clear, our estimates of the output gap needed to be recalibrated. We now think the gap is wider than we thought,” he said.
“All in all, we see more scope for a more accommodative monetary policy.”
Mr. Remolona said another reduction is possible at their last meeting for the year scheduled for Dec. 11, with more cuts beyond that also on the table.
The peso was also dragged by a generally stronger dollar on Thursday as the yen continued its decline due to a likely appointment of a more conservative Japanese prime minister supportive of dovish monetary policy, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
For Friday, the trader sees the peso moving between P58 and P58.50 per dollar, while, Mr. Ricafort expects it to range from P58.10 to P58.35. — Aaron Michael C. Sy
