BSP Has FX Reserves To Curb Overreaction In Local FX - Gov Medalla

USD/PHP is range bound in the first part of trade today, last tracking in the 55.55/60 region, slightly above yesterday's closing levels (55.54). Some support was evident sub 55.50 late yesterday, although PHP has been fairly immune to the recent USD rebound. We sit comfortably below recent highs, with the 200-day MA at 56.11.

• Comments from the BSP Governor have crossed the wires today, with the Governor stating BSP has the FX reserves to use if the local FX market overreacts. Medalla also stated that the BSP won't cut rates faster than the Fed as we progress through 2023.
• Also, late yesterday the BSP stated that it will expand its Currency Risk Protection Program (CRPP) to aid hedging and reduce pressure on spot PHP. This comes after the Deputy BSP Governor spoke over the weekend, stating that FX rates were being monitored and that the FX rate was likely to be broadly stable in the medium term.
• These actions/comments suggest a renewed focus on PHP FX trends. It comes after the step rise through the first part of April (+3.4%) in USD/PHP, but in recent sessions we have recouped around 1.5% of this rally. BSP is likely to be mindful of renewed FX underperformance undermining efforts to return inflation to target.