A QUARTER-POINT hike at the Monetary Board’s rate-setting meeting next week could be a ‘good defense’ for the local currency against a strong US dollar.
Jonathan L. Ravelas, senior adviser at Reyes Tacandong and Co., said on Wednesday that the dollar is stronger today for two reasons: ‘First, investors are positioning ahead of the Fed minutes, hoping for guidance on the interest rate outlook.’
Second, the foreign exchange analyst said: ‘Lingering geopolitical uncertainty in the Middle East is encouraging a flight to safety.’
In uncertain times, the US dollar remains ‘the world’s preferred safe-haven currency,’ he explained further.
As such, Ravelas said, a ’25bps hike next week could be a good defense.’
Explaining this further, he said that raising interest rates ‘tends to boost local assets, thus attracting foreign funds to invest here.’
Ravelas said he also expects the central bank to raise the key interest rate next week as inflation remains elevated.
For Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri Jr., a rate hike ‘is not a guaranteed ‘help.’ Higher rates may attract foreign money to place funds in the PHL, especially from investors that earn lower interest in their home country.’
Meanwhile, John Paolo Rivera, Senior Research Fellow at Philippine Institute for Development Studies (PIDS) told the BusinessMirror that a rate hike can help stabilize the peso at the margin.
‘But monetary policy should ultimately be driven by inflation and the broader economy, not by defending 62,’ Rivera pointed out.
On Wednesday, the Philippine peso closed at P61.815 against the dollar, data from the Bankers Association of the Philippines (BAP) showed.
This marked the fifth straight trading day of the peso’s losing streak against the dollar due to higher oil prices and geopolitical uncertainty.
The rate is 3 centavos weaker than its previous finish of 61.785 on Tuesday.
Rivera attributed the further weakening of the local currency to ‘mainly’ external factors, including higher oil prices, geopolitical uncertainty, and ‘cautious sentiment toward emerging-market currencies.’
Within the trading session, the peso hit its weakest intraday level of 61.995. Its strongest level within the trading day, however, was seen at 61.73 against the greenback.
According to Rivera, some dollar selling and profit-taking likely helped the peso recover from its weakest intraday level.
‘Market participants may also have viewed levels near 62 as an opportunity to take positions,’ Rivera told this newspaper.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corporation (RCBC), attributed the weakening of the local currency to the global oil prices lingering at near three-week highs.
According to Ricafort, Brent crude oil price was steady at US$91 per barrel, the highest in three weeks or since July 30,2026.
Moving forward, Rivera expects the peso to remain ‘volatile’ in the near term but noted that much will depend on oil prices, global risk sentiment, and US monetary policy.
‘Key issue is not a specific level, but whether the movement remains orderly and whether sustained weakness begins to add materially to inflation.’ added Rivera.