FX Daily: BSP pause today; USD/SGD breaks above 1.34


USD/PHP near year’s high; USD/SGD above 1.34.
Group Research, Philip Wee18 May 2023
    Photo credit: Unsplash Photo


    PHP depreciated 0.2% to 56.18 per USD. Today, we expect Bangko Sentral ng Pilipinas (BSP) to keep the overnight borrowing rate unchanged at 6.25%. Finance Secretary Benjamin Diokno and BSP Governor Felipe Medella had telegraphed a pause on cooling inflation. Diokno has a vote on the seven-member monetary policy board. Medella should reaffirm plans to lower the reserve requirement ratio later this year once markets are convinced that inflation is on a sustainable trend back into its 2-4% target. CPI inflation peaked at 8.7% YoY in January and fell to 6.6% in April; Medella thinks it could return to the target around October. The National Economic and Development Authority (NEDA) warned that past hikes (425 bps to 6.25% since May) would slow consumption and investment and sees the PHP’s lower level improving competitiveness for producers of local import substitute and for exporters. USD/PHP should test the year’s high of 56.4 again and eye the top of NEDA’s 53-57 range assumed for 2023 and 2024. 

    SGD depreciated 0.1% to 1.3420 per USD, extending its fall past 1.34. Singapore’s non-oil domestic exports contracted for the seventh month by 9.8% YoY in April, worse than the -8.3% in March. Electronics exports plunged for four consecutive months by more than 20%. The SGD NEER has been capped at 1% above the mid-point of its policy band in the past four months; the central bank did not surprise with an inter-meeting policy tightening in January. CPI inflation fell to 5.5% YoY in March, inside the MAS’s forecast for inflation to average 5.5-6.5% this year, justifying its decision to pause in April. USD/SGD remains a price-taker in the global currency market. Since the policy review in mid-April, the SGD’s depreciation has been consistent with those of Singapore’s major trading partners, especially those in export-led Asia.

    Quote of the day
    “Trouble shared is trouble halved.”
         Lee Iacocca

    18 May in history
    The first Indian film, Shree Pundalik, was released in 1901. 


     

    Philip Wee

    Senior FX Strategist - G3 & Asia
    philipwee@dbs.com
     

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