Central Bank’s Strong Action Stabilizes Peso

The Bangko Sentral ng Pilipinas (BSP) took decisive action on Thursday to prevent the peso from hitting a new 20-month low. The peso closed at 58.75 against the US dollar, improving from the previous day’s 58.86. Earlier in the day, it neared a record low of 59. BSP Governor Eli Remolona Jr. confirmed the intervention, aimed at stabilizing the currency amid speculative pressures and a broader rise in the dollar.
Economists noted that the BSP’s “forceful” intervention was likely due to the dollar’s overnight strength and market focus on the BSP’s rate decision. Despite some dovish remarks from BSP officials and expectations of a US Federal Reserve delay in rate cuts, Remolona suggested the possibility of the BSP cutting rates ahead of the Fed, citing expected inflation easing due to reduced rice tariffs.
However, some market watchers warned that such a move could make the peso less attractive to foreign investors, potentially increasing inflation by making imports more expensive and raising the peso value of foreign debts. Remolona downplayed these concerns, stating that the depreciation’s effect on inflation is minimal.