Peso nearing P59-to-a-dollar level

The hesitation of the Bangko Sentral ng Pilipinas (BSP) to make another key policy rate reduction and the pronouncements of incoming US President Donald Trump on his economic policies are weighing on the peso, with the local currency possibly depreciating to as low as P59 to a dollar sooner or later.

On Tuesday, the peso finished at to P58.81 against the greenback, weaker than Monday’s P58.68.

Regina Capital managing director Luis Limlingan noted that although rate reductions by the BSP are likely, a pause was not ruled out.

“As per BSP Gov. Eli Remolona, a pause in interest rate cuts is possible in the next rate-setting meeting in December,” he said.

Benchmark rates now stands at 6% following two 25 basis points reductions by the BSP during its last two meetings.

For its part, the Bankers Association of the Philippines (BAP) sees the dollar further strengthening under the administration of Trump.

“When you listen to what Trump’s campaign was [all about], he wanted to put tariffs on imported goods, particularly [from] China, because he wants to bring manufacturing back into the US,” BAP President Jose Teodoro Limcaoco said.

“He wants to get rid of illegal immigration … which is responsible for a lot of the jobs that are labor-intensive,” he added.

“So if he’s really successful in that, you’ll see a shortage of labor, you’ll see tariffs making … prices higher, which is inflationary, which means they’ll have to keep rates higher, and it will be good for the US economy which means a stronger dollar,” Limcaocao said.

(PHOTO FROM PNA)