Peso weakens on BSP rate cut

The Philippine peso saw a slight depreciation on Friday as it lost some of its allure to investors following the  Philippine central bank’s move to slash interest rates.

The local currency shed 1 centavo to close at P50.9:41 from 50.8 on Thursday.

The bigger than expected 0.50-cut in local policy rates has “reduced the attractiveness of the peso’s interest returns,” according to Rizal Commercial Banking Corp. chief economist Michael Ricafort.

BSP Governor Benjamin Diokno on Thursday announced key policy rates will be slashed by 50 basis points effective Friday, April 17, 2020. 

This will bring the overnight reverse repurchase rate to 2.75%, the overnight deposit facility to 2.25%, and the overnight lending facility to 3.25%.

The move provides stimulus as the Philippines faces challenges due to halt in economic activities amid the COVID-19 spread. Lower interest rates means cheaper borrowing and more available funds to the economy.

Nevertheless, Ricafort said the peso-dollar exchange rate close at its highest in more than two weeks since March 30.

“The markets are also anticipating developments related to the lockdown —would there be a risk of a total lockdown as signaled by Malacañang or would there be preparations already to lift the ECQ after April 30 as more countries around the world such as US and European countries are preparing for gradual opening of their respective economies,” he said. —LDF, GMA News