THE PESO may strengthen this week amid the seasonal inflows of remittances due to the upcoming holiday season, which could support the currency.

The local unit finished trading at P58.55 against the greenback on Friday, appreciating by 25 centavos from the P58.80-per-dollar close on Thursday, data from the Bankers Association of the Philippines showed.

However, week on week, the peso weakened by 58 centavos from its P57.97 per dollar finish on Oct. 28.

The peso opened Friday’s session at P58.80 per dollar. Its weakest showing was at P58.89, while its intraday best was at P58.34 versus the greenback.

Dollars exchanged rose to $1.11 billion on Friday from $847.7 million on Thursday.

The peso appreciated on Friday after data showed the country’s trade deficit narrowed in September, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The country’s trade deficit stood at $4.821 billion in September, wider than the $3.811-billion gap last year. This was narrower compared with the record $6.021-billion deficit in August, data from the statistics agency showed.

September’s total trade — the sum of exports and imports — increased by 11.3% to $19.136 billion. This pace was slower than the 15% growth in August and the 15.8% climb a year ago.

For the first nine months, the country’s trade balance ballooned to a $46.650-billion deficit, about 1.6 times wider than the $28.58-billion gap in the same period last year.

Mr. Ricafort said the trade deficit data supported for the peso and overshadowed the latest headline inflation print.

Headline inflation accelerated to 7.7% in October from 6.9% in September and 4% in October 2021. This is the fastest pace in nearly 14 years or since the 7.8% seen in December 2008 during the global financial crisis.

October marked the seventh straight month that inflation breached the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target for this year. It also exceeded the median estimate of 7.2% in a BusinessWorld poll.

For the first 10 months, inflation averaged 5.4%, still lower than the BSP’s 5.6% full-year forecast.

The latest headline inflation strengthens the case for more rate hikes by the BSP in their last two meetings for this year.

BSP Governor Felipe M. Medalla said last week the Monetary Board will raise rates by 75 basis points (bps) at its Nov. 17 meeting, matching the US Federal Reserve’s latest move.

Since May, the BSP has raised rates by 225 bps, bringing the overnight reverse repurchase facility rate to 4.25%.

The upcoming 75-bp rate increase will help ease currency pressures, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

He said the central bank will likely continue supporting the peso this week to prevent it from breaching the P59-a-dollar level up to their policy meeting next week.

Mr. Ricafort said for this week, the peso will continue to be supported by overseas Filipino workers’ (OFW) remittances.

“The expected seasonal increase in OFW remittances and conversion to pesos to finance travel and other holiday-related spending…could be extended for some people during the week, but could be offset by disruptions brought about by Tropical Storm Paeng,” Mr. Ricafort said.   

“The next seasonal surge in OFW remittances and conversion to pesos will be in preparation for the holidays in December 2022, especially a few days/weeks before the Christmas and New Year holidays,” he added.

For this week, Mr. Ricafort gave a forecast range of P58.30 to P58.80 against the greenback, while Mr. Asuncion sees the peso moving within P58.60 to P59. — Keisha B. Ta-asan