THE PESO strengthened on Tuesday on the back of positive market sentiment on easing inflation and amid expectations of another contraction in the US services sector.
The local unit finished trading at P50.52 per dollar yesterday, appreciating by 7.5 centavos from its P50.595 close on Monday, according to data from the Bankers Association of the Philippines.
The peso started the session at P50.61 per dollar. Its weakest showing was at P50.61 while its strongest was at P50.49 against the greenback.
Dollars traded increased to $558.66 million from the $349.35 million seen on Monday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso’s gain came after the release of April inflation data.
“The peso exchange closed stronger as sentiment was supported by the latest easing trend in inflation which is the slowest in five months,” he said in a text message.
April headline inflation eased further to 2.2% from the 2.5% in March as well as the three percent seen in the same month last year, according to the Philippine Statistics Authority.
Downside risks mainly stemmed from the decrease in transport costs due to falling oil prices. This offset the uptick in food commodities during the lockdown in Luzon.
Meanwhile, a trader said the peso was stronger on profit taking amid expectations of weak US data overnight.
“The peso strengthened due to profit taking amid likely sharp declines in US services reports,” the trader said in an e-mail.
The Institute for Supply Management will report the non-manufacturing index for April overnight.
Reuters reported that the US non-manufacturing index fell to a reading of 52.5 in March, which is the lowest since August 2016 as industries reported moderation in new orders and decline in employment due to the virus outbreak. A reading below 50 indicates contraction.
For today, Mr. Ricafort gave a forecast range of P50.40 to P50.60 per dollar, while the trader expects the local unit to move around the P50.50 to P50.70 band.
Asian currencies were mostly firmer on Tuesday, as easing lockdowns in some parts of the world offset worries about rising tensions between China and the United States.
The Southeast Asian economy has been hit with a double whammy of a slump in oil prices and disruptions caused by virus-driven curbs.
The Taiwan dollar was the best performer among emerging Asian currencies gaining 0.3%, while the Singapore dollar rose 0.2% .
Elsewhere, the Indonesian rupiah weakened as much as 0.3% after Southeast Asia’s largest economy recorded its weakest economic growth in nearly two decades in the first quarter.
The Thai baht weakened marginally after April consumer prices fell 2.99% from a year earlier, well below expectations, to mark its biggest decline in more than a decade. — L.W.T. Noble with Reuters