By Karl Angelo N. Vidal
THE PESO strengthened against the dollar on Tuesday following the slower-than-expected inflation print for May.
The local unit closed the session at P52.40 against the greenback, 18 centavos stronger than the P52.58-per-dollar finish on Monday.
The peso opened the session flat at P52.58 versus the greenback, while it slipped to a low of P52.62 per dollar. Meanwhile, its intraday high stood at its P52.40 finish.
Dollars traded rose to $646.7 million from $493.8 million that switched hands the previous day.
Traders said the peso strengthened in reaction to the slower-than-expected May inflation print.
“Softer-than-expected inflation level probably helped the peso’s strength,” Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc., said in a text message on Tuesday.
The average increase in prices of basic goods and services accelerated to a new five-year high of 4.6%, the Philippine Statistics Authority reported Tuesday, June 5.
This was a tad faster than the 4.5% print recorded the previous month, although slower than the 4.9% median estimate in a BusinessWorld poll of 10 economists.
The faster inflation print last month was mainly driven by price increases for fuel, rice, fish and meat.
“The expectation was so high, so when it came out slower, it ended up being positive for the peso. It’s not as bad as we thought it was,” a foreign exchange trader said.
However, Mr. Asuncion noted that the May inflation result may not be part of a trend.
“This may be one-off, with inflation [seen] to further rise before coming back to pre-TRAIN level,” he said, referring to the Tax Reform for Acceleration and Inclusion act which took effect this year.
Meanwhile, another trader said easing political tensions overseas lifted the local unit further.
“Easing geopolitical concerns on Italian and Spanish politics, and on planned US-North Korean summit likewise helped to the appreciation of the peso,” the trader said.
For Wednesday, June 6, Mr. Asuncion expects the peso to move between P52.30 and P52.70 versus the dollar, while the first trader gave a P52.20-P52.55 range.
“The local currency might appreciate [on Wednesday] ahead of balance of trade data from the US, as many market players would probably monitor this data in light of the recent US trade stance with its trading partners,” the second trader noted, seeing the peso to trade between P52.30 and P52.50.
Most other Asian emerging market currencies also rose against the dollar on Tuesday, as worries about economic issues eased while a widely-anticipated US interest rate hike next week has already been priced in by traders. — with Reuters