Home Banking & Finance Peso strengthens as inflation eases in December

Peso strengthens as inflation eases in December

THE PESO climbed against the dollar on Wednesday following the release of data showing slower inflation in December 2021. — BW FILE PHOTO

THE PESO rebounded versus the greenback on Wednesday as inflation was slower than expected in December.

The local unit ended trading at P50.96 per dollar on Wednesday, appreciating by 34 centavos from its Tuesday close of P51.30.

The peso opened Wednesday’s session stronger at P51.20 against the dollar. Its weakest showing was at P51.33, while its intraday best was at P50.89 versus the greenback.

Dollars exchanged slipped to $1.209 billion on Wednesday from $1.223 billion on Tuesday.

The peso strengthened as inflation was slower than market expectations in December, a trader said in an e-mail.

Inflation slowed to its lowest level in a year in December 2021 as food and transport prices eased, bringing the full-year average above the government’s target, data released by the Philippine Statistics Authority (PSA) on Wednesday showed.

Preliminary data from the PSA showed headline inflation eased to 3.6% last month from 4.2% in November. December’s inflation print was the slowest reading in 12 months or since the 3.5% recorded in December 2020.

Inflation averaged 4.5% for 2021, higher than the 2.6% recorded in 2020. This breached the central bank’s 2-4% target band as well as the revised 4.4% forecast for the year.

The renewal of the bilateral currency swap agreement between Japan and the Philippines also boosted investor sentiment, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Under the agreement which took effect on Jan. 1, both parties will be allowed to swap their local currencies in exchange for the dollar. It also allows the Philippines to swap pesos for the yen.

The limit for the swap agreement was kept at $12 billion or its equivalent amount in yen for the Philippines. Japan can swap up to as much as $500 million.

For Thursday, Mr. Ricafort gave a forecast range of P50.80 to P51.05, while the trader expects the local unit to move within P50.90 to P51.15 per dollar. — LWTN