Peso inches higher on inflation

THE PESO strengthened against the dollar on Monday as the slower-than-expected September inflation print continued to boost the attractiveness of the local currency.
The local unit closed Monday’s session at P54.185 versus the greenback, better than its P54.23 finish on Friday.
The peso opened the session weaker at P54.25 per dollar, dropping to an intraday low of P54.30. Its best showing stood at P54.15 against the US currency.
Dollars traded rose to $845.04 million from the $592.5 million tallied the previous session.
A foreign exchange trader said the peso gained strength yesterday due to the “sustained impact” of the slower-than-expected inflation reading for September.
The Philippine Statistics Authority announced last week that headline inflation printed at 6.7% in September, marking its fastest pace in nine years.
However, the inflation print last month came in slower than the 6.8% estimate in a BusinessWorld poll, which matched the projection of the Bangko Sentral ng Pilipinas.
“However, the peso was generally weaker in the intraday trade following the release of mostly upbeat US labor data last Friday.”
Meanwhile, another trader said the peso consolidated the whole day as it outperformed the Asian currencies against the dollar.
“This afternoon, we saw a huge flow that gave strength to the peso. It was not from our end,” the trader said over the phone, suspecting it may came from overseas.
For Tuesday, the second trader expects the peso to trade between P54.15 and P54.30, while the first trader gave a P54.10-P54.30.
“If we continue to see inflows, then we may try again the P54.05-P54.10 level,” the second trader said.
Meanwhile, Philippine Bank of Communications (PBCom) Treasurer Alan E. Atienza expects the peso to weaken further next year as the US Federal Reserve is expected to gradually increase interest rates.
“I think the peso will continue to weaken. The direction is for the dollar to strengthen in the medium term largely because of the additional rate hikes by the Fed,” Mr. Atienza told reporters during the listing ceremony of PBCom’s long-term certificates of time deposit due 2024.
The US central bank is expected to tighten its benchmark rates again in December and two more for 2019 on the back of its robust job market and elevated inflation.
Aside from this, Mr. Atienza added that capital outflows are expected next year given the Duterte administration’s infrastructure push.
“Since the start of the Duterte administration, we’re net importer. That’s why there’s continued demand for the US dollars,” he said. “I think that would continue to prevail by at least the first half of next year.”
According to the latest data, the country’s trade deficit stood at $3.55 billion in July, soaring from just $1.31 billion a year ago. During the month, the Philippine import print climbed 32%, outpacing the meager 0.3% export growth.
The government is embarking on an P8-trillion infrastructure spending program until 2022 in an effort to spur economic growth to 7-8% until then.
Mr. Atienza said the peso might end the year at P53.50 versus the dollar due to strong remittance in time for the holiday season, as well as the hawkish stance of the local central bank. — Karl Angelo N. Vidal