USD/PHP Rebounds Back Close To YTD Highs, Cross Asset Headwinds Rise

USD/PHP downside has proven to be short lived. The pair has rebounded firmly today and is back to 58.20/25, around 0.45% weaker in PHP terms. We aren't too far away from earlier May highs in the pair (58.28).

• As we noted yesterday recent dovish rhetoric from the BSP/local rates outlook may have lent the market towards buying dips in the pair. Post the Tuesday rise in US yields has also aided broader USD sentiment.
• The recovery in oil prices is another headwind for PHP, although correlations don't appear that strong through May (in terms of higher oil prices driving USD/PHP higher).
• Month end may also be playing a role given continued trade deficits, while local equities are also weaker, back sub the 200-day MA.
• Focus may now rest on whether the authorities ramp up actual or verbal intervention, particularly if we break to fresh highs, although the BSP has stated there is no line in the sand in terms of levels.
• Implied option volatilities aren't pricing in anything alarming either. the 1 month rests around 5.45% currently, off late April highs of 6% and earlier YTD highs above 6.75%.