Peso Weakens to P57:$1 Following BSP Rate Cut

The Philippine peso weakened to the P57:$1 level on Friday, marking a depreciation of 34.5 centavos from Thursday’s close of P56.9:$1. This decline came a day after the Bangko Sentral ng Pilipinas (BSP) implemented a policy rate cut, the first in nearly four years.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort attributed the peso’s depreciation to the BSP’s 0.25% rate reduction, which brought the reverse repurchase (RRP) rate down to 6.25%, the overnight deposit rate to 5.75%, and the overnight lending facility rate to 6.75%. This move follows a period of stability in the policy rates, with the last cut occurring in November 2020 and an off-cycle hike of 25 basis points in October 2023.

The peso’s decline was also influenced by the strengthening of the US dollar, driven by stronger-than-expected US retail sales and jobless claims data, which have reduced recession fears. The US Census Bureau reported a 1% increase in retail sales for July, while the US Department of Labor noted a drop in jobless claims to 227,000 for the week ending August 10.

Security Bank chief economist Robert Dan Roces highlighted that the stronger US economic data contributed to the dollar’s gain, further pressuring the peso.

Looking ahead, the performance of the peso against the dollar will partly depend on the BSP’s intervention strategies, as observed over the past two years.