Peso hovers at 52-level, further weakness seen


Posted at May 28 2018 12:04 PM

MANILA - Higher liquidity due to the central bank's decision to reduce the reserve requirement for banks and maturing government bonds will be "negative" for the peso, ING said.

The reduction in the reserve ratio requirement or RRR will bring up to P90 billion to the system, adding to the P130 billion from peso bonds that will mature soon, the bank said in a research note.

The peso opened at P52.635 against the dollar on Monday, from P52.70 last Friday.

"Liquidity in the next few days will be high and work against the peso unless BSP (Bangko Sentral ng Pilipinas) directly intervenes in the spot market or external developments turn more friendly to emerging markets," ING said.

The RRR cut is part of the Bangko Sentral's move to bring the ratio closer to that of its peers in the region, ING said.

Increased liquidity in the long term would also encourage banks to lend more, driving imports and widening trade, deficits, it said.