Peso may strengthen vs dollar on slower Aug. inflation print

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THE PESO is likely to perform stronger this week amid expectations of a slower August inflation print.

The local unit closed at P52.05 against the greenback on Friday, 13 centavos stronger than the P52.18-to-a-dollar finish on Thursday, ahead of the implementation of the first tranche of the planned 15% tariffs by the United States on some $125 billion worth of Chinese goods.

On a week-on-week basis, the peso went up by 22 centavos from its P52.27-per-dollar finish last Aug. 23.

“There seems to be a consensus that August inflation further slowed down. This will weigh and may strengthen the peso further as inflation numbers are set to be revealed [this] week,” Ruben carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc., said in an e-mail late last week.

“If and when we hear something to be announced over the weekend regarding the trade agreement between the US and China, we’ll see a continuation in the improvement in the risk tone or risk sentiment of the market players,” a currency trader said separately on Friday.

A BusinessWorld poll of 12 economists late last week yielded a median inflation estimate of 1.8% for August, settling above the midpoint of the 1.3-2.1% forecast range provided by the Bangko Sentral ng Pilipinas’ Department of Economic Research.

If realized, this would mark the third straight month of slower inflation from June’s 2.7%.

This reading would also be lower from 2.4% in July and 6.4% in August last year.

The estimate matches October 2016’s 1.8% print and would be the slowest reading in 35 months or since the 1.7% pace recorded in September 2016.

The Philippine Statistics Authority is scheduled to report August inflation data on Sept. 5.

Meanwhile, the US was set to begin collecting 15% tariffs on more than $125 billion worth of Chinese imports, including smart speakers, Bluetooth headphones and many types of footwear starting yesterday.

No grace period will be provided on those tariffs for goods in transit, the US Customs and Border Protection agency said on Friday.

As part of its retaliation, China will begin imposing a 5% tariff on US crude oil also from Sept. 1, the first time US oil has been targeted since the world’s two largest economies started their trade war more than a year ago, Reuters reported.

Tariffs have been imposed on $250 billion of Chinese products so far since the trade war began in 2018, and US trade groups and manufacturers have criticized the policies for hurting profits.

This week, UnionBank’s Mr. Asuncion expects the peso to trade between P51.90 and P52.20 versus the dollar, while the trader sees the local unit moving from P52.00 to P52.50. — Mark T. Amoguis