The Philippine peso fell against Wednesday, closing at 57.18 against the US dollar, its lowest level in 17 months, from 57.0 on Tuesday, as investors sought the safety of the greenback amid the tension in the Middle East.
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said the peso moved in line with other emerging market currencies “because of what’s going on in the Middle East.”
He said the peso was also adjusting to US Federal Reserve Chair Jerome Powell’s speech that “maybe they won’t ease until September.”
A weaker peso pushes the value of imported goods including petroleum products and food commodities.
Remolona said, however, the depreciation of the peso won’t affect their plans to ease monetary policy by the fourth quarter of 2024 or first quarter of 2025.
“I would say the central scenario would ease in the fourth quarter. If things are worse, then we might be postponed to the first quarter of 2025,” Remolona said in a news briefing.
Remolona said the magnitude of the adjustment of the peso was not large enough to affect inflation expectations for now.
“I think the impact on Monetary Policy is, I would say, not large,” Remolana said.
“It might be a factor depending on what happens between now and the next monetary policy meeting, but the adjustment so far is not gonna change what I think we might be doing,” he said.
The next policy meeting is scheduled on May 16.
The Monetary Board earlier kept the overnight borrowing rate steady at 6.5 percent for the fourth consecutive policy meeting since October 2023.
It also maintained the interest rates on overnight deposit and lending facilities at 6.0 percent and 7.0 percent, respectively.
BMI, a Fitch Solutions company, expects the Philippine peso to be volatile in the short term due to the constant repricing of interest rates expectations in the US.
“However, we think that this will eventually fade once the US Federal Reserve embark on its first cut in July. This means that the Philippine peso will remain somewhat stable at P56.50/USD,” BMI said.
“In the longer term, the currency will stay on its depreciatory trend, weakening to P57.20/USD by end-2025,” it said.