Peso Corrects Wednesday's Dip To 17-Year Low, BSP Rate Decision On Tap

Spot USD/PHP now changes hands -0.120 at PHP54.370 as a slide in the dollar index (BBDXY) after Asia hours Wednesday allows the cross to move away from a fresh cycle peak hit on the eve of BSP rate review. Bears look for a deeper correction past the nearest round figures of PHP54.000 and PHP53.500. Meanwhile, bulls need a move through yesterday's high of PHP54.615 to reassert their dominance and bring the PHP55.000 figure into play.

• USD/PHP 1-month NDF last -0.020 at PHP54.470, with bears looking for a sell-off past Jun 15 low of PHP53.330 and towards Jun 13 low of PHP53.000. Bulls would be pleased by a jump above yesterday's high of Jun 22 high of PHP54.760, which would clear the way to Oct 4, 2018 high of PHP54.800.
• Bangko Sentral ng Pilipinas will announce its monetary policy decision later today and in the wake of the latest round of comments from incoming Governor Medalla, we stand by our call for a 25bp hike to the key policy rate (see our preview to see our analytical piece and a summary of sell-side views).
• Just to recapitulate, Medalla said that the central bank is unlikely to raise the policy rate by more than 25bp today although he "doesn't know for sure how MBMs will vote." The official described peso depreciation as "more of a strong dollar than a weak peso story."
• His reluctance to address PHP weakness with more aggressive policy tightening helped spot USD/PHP rise to its highest point since 2005 on Wednesday, with broader risk aversion also playing a role here.