Peso surges as SONA boosts sentiment

THE PESO surged and returned to the P55-per-dollar level on Tuesday as the legislative agenda unveiled in the first State of the Nation Address (SONA) of President Ferdinand “Bongbong” R. Marcos, Jr. boosted market sentiment.

The local unit closed at P55.30 per dollar on Tuesday, gaining 80 centavos from its P56.10 finish on Monday, based on Bankers Association of the Philippines data.

The peso opened Tuesday’s session stronger at P55.85 per dollar. Its weakest showing was at P55.88, while its intraday best was at P55.29 against the greenback.

Dollars exchanged surged to $1.43 billion on Tuesday from $722 million on Monday.

The peso appreciated after Mr. Marcos delivered his first SONA on Monday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

In his speech, Mr. Marcos vowed to overhaul the tax system and outlined a 19-point legislative agenda designed to spur growth, bring down poverty and make the Philippines an investment destination as the economy continues to recover from the coronavirus pandemic.

The peso also continued to strengthen “as the global strong dollar theme continues to fade into the night,” ING Bank N.V.-Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail. “A short two weeks ago the Fed was primed to hike aggressively to tame red hot inflation, but fortunes have changed drastically, with investors now fearful of a potential recession.”

“A stark slowdown in growth would prompt a less hawkish central bank response, causing investors to reassess their projections for the Fed’s dot plot,” he added. 

The US Federal Reserve is expected to raise its benchmark overnight interest rate by three-quarters of a percentage point to a target range of 2.25% to 2.50% at the end of its July 26-27 meeting.

Mr. Mapa said the peso will likely trade sideways in the coming days “as investors now assess just how many rate hikes [Fed Chief Jerome H.] Powell has left in the tank and whether the BSP (Bangko Sentral ng Pilipinas) can steady sentiment while containing inflation expectations,” he added.

On Tuesday, BSP Governor Felipe M. Medalla said the central bank will likely hike borrowing costs by 25 or 50 basis points (bps) at their August meeting with the Fed expected to continue firing off big rate increases, although he ruled out another off-cycle move.

The BSP Monetary Board on July 14 raised its benchmark interest rates by an all-time high 75 bps in an off-cycle review. The surprise move came ahead of its regular policy meeting scheduled on Aug. 18, and follows two 25-bp rate hikes each in May and June.

For Wednesday, Mr. Ricafort sees the peso moving within P55 to P55.40 against the dollar. — K.B. Ta-asan