The movement of the peso this year will largely hinge on the actions of the US Federal Reserve whether it will raise or cut its key interest rates in the coming months, Bank of the Philippine Islands said in a report over the weekend.
BPI said with demand continuously improving, the peso might continue to weaken in the near term given the sizeable import requirements to stabilize prices.
“But the behavior of the local currency in 2023 may largely depend on what the Federal Reserve will do. If a recession in the US happens, the US central bank may cut interest rates eventually,” BPI said.
BPI said a rate cut by the Fed would diminish the strength of the US dollar and provide support to other currencies like the peso. It said that in this situation, the appreciation of the local currency would likely be smaller compared to other currencies given the substantial current account deficit of the Philippines.
The peso fell 12 centavos to close at 55.24 on Friday, its lowest level in a month. Julito G. Rada