Peso weakens vs dollar on inflation bets


THE PESO depreciated against the dollar on Tuesday after the Bangko Sentral ng Pilipinas (BSP) said inflation may have quickened further in April.

The local unit closed at P57.76 per dollar on Tuesday, weakening by 8.5 centavos from its P57.675 finish on Monday, Bankers Association of the Philippines data showed.

The peso opened Tuesday’s session stronger at P57.60 against the dollar. Its intraday best was at P57.45, while its weakest showing was at P57.77 versus the greenback.

Dollars exchanged rose to $1.89 billion on Tuesday from $1.46 billion on Monday.

“The peso closed on a weaker note for the month amid domestic expectations of a potential uptick in headline inflation for April,” a trader said in an e-mail.

The BSP on Tuesday said headline inflation could have picked up further in April and even breached its 2-4% annual target.

The central bank said the April consumer price index (CPI) may have settled within 3.5% to 4.3% amid higher prices of rice, meat and gasoline and a weak peso.

The low end of the BSP’s estimate would be slower than the 3.7% pace in March as well as the 6.6% logged in April 2023.

However, the high end of the range would be the fastest since the 4.9% logged in October 2023. This would also mark the first time since November 2023 that the CPI exceeded the central bank’s 2-4% goal.

Headline inflation averaged 3.3% in the first quarter, within the central bank’s target and below its baseline forecast of 3.8% and risk-adjusted forecast of 4% for the year.

The peso was also lower amid the dollar’s broad strength, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Thursday, the trader said the peso could continue to drop on likely robust US data. The trader sees the peso moving between P57.60 and P57.85, while Mr. Ricafort expects it to range from P57.65 to P57.85 per dollar.

Philippine financial markets are closed on May 1, Wednesday, for Labor Day.

The US Federal Reserve begins its two-day monetary policy meeting on Tuesday, where it’s expected to hold rates at 5.25%-5.5%, with US inflation proving to be sticky, Reuters reported.

The dollar rose to 0.16% to 105.69 against a basket of currencies ahead of the Fed’s meeting, after slipping 0.25% in the previous session.

The yen dropped against the dollar on Tuesday, giving up some of its sharp gains the previous day sparked by suspected intervention by Japanese authorities.

The currency was down 0.4% to 157 yen per dollar, but off its 34-year low of 160.245 yen hit on Monday when traders say yen-buying intervention by Tokyo drove a eye-catching rebound of nearly six yen. — AMCS with Reuters

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