Russo-Ukrainian War Pummels Philippine Peso

Spot USD/PHP has surged to fresh cycle highs, roaring above the PHP52.000 figure and printing levels not seen since Sep 27, 2019. The rate trades +0.328 at PHP52.070 at typing, with topside focus falling on Sep 25, 2019 high of PHP52.308. A break here would expose Sep 17, 2019 high of PHP52.405. Bears look for a pullback under the PHP51.500 mark, a former key resistance breached last week.

• USD/PHP 1-month NDF last +0.330 at PHP52.580. Bulls keep an eye on Mar 19, 2020 high of PHP52.830, while bears look for a retreat under Jan 4 high of PHP52.140.
• The debate on looming fuel price increases has reached Southeast Asia, with Unioil Petroleum Philippines warning against hefty price hikes this week. The government has pledged subsidies for farmers and fishers to be distributed around the month-end.
• Adding the monetary policy perspective to the picture, BSP Gov Diokno stressed that higher oil prices are the main channel through which the Russo-Ukrainian war could affect the Philippines. He noted that in the worst case scenario inflation could be 0.7-1.0pp above baseline this year, i.e. between +4.4%-4.7% Y/Y, adding that the central bank has adequate FX reserves to temper any volatility in the peso.
• Separately, Bangko Sentral ng Pilipinas said that local lenders' exposure to Russia is minimal, while the Philippines has not imposed any targeted financial sanctions related to Russia's invasion of Ukraine.
• The domestic data docket this week is headlined by international trade figures, due for release on Friday.