Philippine Peso: Official jawboning slows depreciation – OCBC

The Philippine Peso (PHP) demonstrated a modest recovery as Philippine authorities, including President Marcos and Bangko Sentral ng Pilipinas (BSP) officials, ramped up their rhetoric against further depreciation. While this stronger jawboning may help temper one-sided depreciation expectations, concerns over elevated oil prices and inflation risks remain, keeping the bank cautious. USD/PHP continues to exhibit bullish momentum with support at 63.62 and resistance near 64.18/20.

Yesterday, the PHP showed modest improvement after posting weaker performance across multiple sessions. Philippine authorities intensified their statements, pledging to defend the currency and employing the necessary tools to achieve this. President Marcos emphasized the government's commitment to this cause following a meeting with BSP Governor Remolona and other economic officials, in the wake of the previous week's substantial 50 basis points rate hike.

The heightened response from policymakers suggests that concerns about the speed of depreciation and its impact on imported inflation are now a priority. We maintain a cautious stance on PHP, despite the potential that stronger official rhetoric could deter expectations of unidirectional currency weakness in the near term. The BSP has already indicated its willingness to tighten policy to address inflation risks, but any additional rate increases will come at the expense of domestic growth.

Given that oil prices remain elevated, the demand for USD is not anticipated to decline rapidly. We will monitor further BSP communication and assess whether the recent PHP recovery can extend beyond a temporary reaction to official remarks. While the bullish momentum on the daily chart remains intact, the RSI has turned lower from overbought conditions, and a retracement cannot be ruled out. Key support is found at 63.62, while resistance levels are at 64.18/20, marking the recent high.