THE PESO traded sideways on Thursday on slower-than-expected February inflation which could push the central bank to cut rates sooner rather than later.

The local unit closed at P50.585 against the dollar, depreciating by 3.4 centavos from its Wednesday finish of P50.551.

The peso opened at P50.60 against the greenback. Its weakest showing for the day was at P50.64 while its intraday best was at P50.575 per dollar.

Dollars traded declined to $945.45 million from $1.187 billion on Wednesday.

UnionBank of the Philippines, Inc. Ruben Carlo O. Asuncion said a major factor that affected currency trading on Thursday was inflation data.

“The peso was steady today was just affirming the lower-than-expected February inflation data,” Mr. Asuncion said in a text message.

“Even amidst the continuing uncertainty due to the COVID-19 (coronavirus disease 2019) outbreak outside China, the local currency moved sideways as global support for the global economy continued through various stimulus programs,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also attributed the peso’s movement to inflation data, saying this could result in a possible easing in the near term.

“The peso exchange rate closed slightly weaker…after lower-than-expected inflation data that could increase the chances of a further cut in local policy rates by at least 25 basis points (bps) as early as this month,” Mr. Ricafort said in a text message.

The Philippine Statistics Authority reported yesterday that headline inflation in February slowed to 2.6% from 2.9% in January, on the back of easing food, transport, and utility prices.

The figure is close to the lower end of the 2.4-3.2% estimate range for the month of the Bangko Sentral ng Pilipinas (BSP).

BSP Governor Benjamin E. Diokno yesterday said the emergency 50-bp rate cut by the US Federal Reserve and the February inflation data “will serve as inputs” for the Monetary Board’s (MB) second policy-setting meeting for the year on March 19.

“One thing is certain: there will be no off-cycle MB move to cut policy rates,” Mr. Diokno said.

The BSP slashed rates by 25 bps on Feb. 6, reducing the rates on the BSP’s overnight deposit, overnight reverse repurchase, and overnight lending facilities to 3.25%, 3.75% and 4.25%, respectively.

For today, both Mr. Asuncion and Mr. Ricafort gave a forecast range of P50.40 to P50.70

Most Asian currencies also weakened on Thursday as the dollar recovered, with investors now awaiting clarity on further monetary easing measures and uncertainty around coronavirus to reduce before taking on riskier bets.

Upbeat jobs data and the resurgence of Joe Biden as the potential Democratic nominee for US Presidential elections offered support to the dollar overnight, although gains were capped as markets still priced in further monetary easing — L.W.T. Noble with Reuters

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