More hawkish BSP, hefty reserves to tame peso depreciation: analyst


Posted at Jul 14 2022 03:27 PM | Updated as of Jul 14 2022 04:14 PM

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A more hawkish central bank, as well as hefty gross international reserves will "prevent the Philippine peso from spiraling out of control," a Union Bank official said on Thursday.

"We don’t see the dollar-peso spiraling out of control at this point given the BSP dollar reserves, while narrowing, still offer quite a hefty cover, I think 9 months of imports," said Unionbank senior vice president and chief investment officer Julian Tarrobago.

"Also, the central bank said it will hike rates by bigger amounts if the peso weakens too fast and by too much," he said.

The Bangko Sentral ng Pilipinas said May's GIR dropped to $103.53 billion in May from $106.76 billion in April. But this is still more than an adequate external liquidity buffer, and is equivalent to 9.1 months' worth of imports of goods and payments of services and primary income, the BSP said.

Due to external pressures such as the monetary tightening by the US Federal Reserve, among others, Tarrobago said the peso could hit P56 to P57 to $1 during the year.

The BSP on early Thursday announced an off-cycle 75-basis points rate hike, which brought the key policy rate to 3.25 percent. The adjustment was made ahead of its Aug. 18 meeting. 

The peso weakened to as low as P56.37 to a dollar, nearing an all-time low.