Peso strengthens on inflation, GIR data

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THE PESO rose on the back of local data. — BW FILE PHOTO

THE PESO strengthened on faster-than-expected inflation in December and following an all-time high dollar reserve level as of end-2019.

The local unit ended trading at P50.76 per dollar on Tuesday, appreciating by 17 centavos from its P50.93 close on Monday, according to data from the website of the Bankers’ Association of the Philippines.

The peso opened at P50.945 against the greenback. Its weakest showing was at P50.98 while its intraday high was at P50.71 versus the dollar.

Dollars traded rose to $1.627 billion from $1.579 billion in Monday.

Analysts attributed the peso’s strength against the dollar to both local and international developments.

“The peso appreciated following the release of stronger-than-expected Philippine inflation report for December 2019,” an analyst said in an e-mail.

Headline inflation in December quickened to 2.5%, according to the Philippine Statistics Authority. The rise was on the back of seasonal price upticks buoyed by the holiday spendings as well as weather disruptions.

This is the second straight month of pickup after the 1.3% logged in November. It was also higher compared to the 2.1% median estimate in a BusinessWorld poll of 13 economists last week.

The December rate brought the 2019 average to 2.5%, within the central bank’s 2-4% target range for the year.

“Aside from the stronger inflation, the stronger reserve data and the news that Middle East tensions started to fade out also bode well for the peso,” an analyst said in a phone call.

The Bangko Sentral ng Pilipinas (BSP) reported on Thursday that gross international reserves hit an all-time high of $87.855 billion as of December, up by 1.89% from the $86.227 billion as of November and by 10.94% from the end-December 2018 level of $79.193 billion.

“The month-on-month increase in the GIR (gross international reserves) level reflects the inflows arising from the BSP’s foreign exchange operations and income from its investments abroad, and the National Government’s net foreign currency deposits,” the BSP said.

For today, the first trader sees the peso moving around the P50.70-50.90 band, while the second trader gave a forecast range of P50.60-50.90 a dollar. — LWTN