Philippine Peso: Is oil limiting the bearish bias? – OCBC

Sentiment towards the Philippine Peso (PHP) remains weak despite a larger-than-expected 50bp hike by Bangko Sentral ng Pilipinas (BSP) to 5.50%, with inflation concerns persisting, according to OCBC strategists Christopher Wong and Sim Moh Siong. While higher rates may limit depreciation, elevated Oil prices, external imbalances and worries about domestic growth are unlikely to be fully countered. Maintaining its cautious outlook, OCBC says lower Oil prices and an improved external environment are needed for a sustained PHP recovery.

Why Have Rate Hikes Failed to Lift Peso Sentiment?

"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.)