PESO. Record slide outlasts a 50-bp hike

Highlights

• At 63.419 pesos per dollar on October 23, the BSP reference rate shows the peso at a fresh record low for a third straight trading session.
• A 50-basis-point hike that lifted the Target RRP to 5.5%, the biggest in over three years, did not halt the slide.

The Setup

Equities followed: the PSEi fell 0.88% to 5,728.63 as investors digested the Monetary Board's move, with losers outnumbering winners 111 to 66.

Source: news article

Our Read

The Monetary Board tightened as headline inflation jumped to 7.2% in September from 6.1% in August, a 1.1-point acceleration in a single month. A larger hike is the BSP's main tool against that price pressure. Yet the peso kept setting record lows in the sessions after the decision.

Our takeaway is that the hike alone has not steadied the currency. The BSP has declined to defend any particular peso level, and the trader quoted said this leaves speculators "testing BSP's real threshold," which keeps positioning, rather than a policy floor, driving the exchange rate.

What We're Watching

• The PSA's October headline inflation print.
• Any change in the BSP's stance that it does not target a specific peso level.
• The next Monetary Board decision on the Target RRP.