Bias: The HKD/PHP exchange rate remains bullish-to-range-bound as it is slightly above the 90-day average and within the upper half of its 3-month range.
Key drivers:
• Rate gap: The substantial interest rate differential, with HKD rates near zero compared to higher USD rates, pressures the HKD.
• Risk/commodities: Recent stability in oil prices has supported a generally optimistic outlook for the HKD as global demand steadies.
• Macro factor: Despite recent peso depreciation, the Bangko Sentral ng Pilipinas remains committed to controlling inflation rather than daily volatility, which affects market perceptions of the PHP.
Range: Expect the HKD/PHP pair to hold steady within its recent range, with potential to drift slightly higher.
What could change it:
• Upside risk: A significant increase in foreign investment in Hong Kong could bolster the HKD.
• Downside risk: If the BSP implements additional monetary easing, it could further weaken the PHP.