Philippine Peso: Oil Limits Bearish Bias – OCBC

A 50bp BSP rate hike to 5.50% has failed to relieve pressure on the Philippine Peso (PHP). OCBC strategists Christopher Wong and Sim Moh Siong say the larger-than-expected increase by Bangko Sentral ng Pilipinas reflects persistent inflation concerns. While higher rates may curb depreciation, they are unlikely to fully counter elevated oil prices, external imbalances and concerns about domestic growth. OCBC remains cautious, arguing that a sustained PHP recovery requires lower oil prices and an improved external environment.

50bp Hike Leaves Peso Sentiment Subdued

"PHP remained under pressure despite BSP’s larger-than-expected 50bp rate hike to 5.50%. The decision reflects growing concerns over inflation persistence, with BSP raising its 2027 inflation forecast to 6% from 5.4%, amid elevated oil prices and potential El Niño-related food price pressures."

"We remain cautious on PHP. Higher rates may help temper depreciation pressure, but elevated oil prices, external imbalances and concerns over domestic growth remain constraints. Further tightening also comes at a cost to an already slowing economy."

"For now, a more sustained PHP recovery would likely require some easing in oil prices and an improvement in the broader external backdrop."

"Daily momentum is mild bullish while RSI enters into overbought conditions. 2-way trades near recent highs not ruled out. Immediate resistance at 63.65, 63.85 levels (recent high). Support at 63 levels (21 DMA), 62.65 (21 DMA)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)