THE PESO strengthened against the dollar on Tuesday to a seven-week high as the central bank said inflation likely quickened further last month.
The local unit ended the session at P53.095 versus the greenback, 12.5 centavos stronger from its P53.22-per-dollar finish on Monday.
This was the peso’s best showing in seven weeks or since it closed at P52.95 versus the US currency on June 11.
The peso strengthened immediately as it opened the session at P53.15 versus the greenback. It slid to as low as P53.22 intraday, while its best showing stood at P53.09 per dollar.
Dollars traded climbed to $670.81 million from the $664.5 million that exchanged hands the previous day.
In an e-mail, a trader said the peso continued to strengthen following the faster inflation projection of the Bangko Sentral ng Pilipinas (BSP) for July.
“The peso continued appreciating after the BSP gave its initial inflation forecast for July,” the trader said.
The BSP’s economic research department said yesterday that July inflation could have fallen within a 5.1-5.8% range from the 5.2% print in June.
The central bank said water rates adjustments, petroleum prices and jeepney fares, among others, could have put “upward pressures” on inflation during the month.
The trader added that the inflation estimate of the BSP increased expectations of a rate hike from in its Monetary Board meeting this month.
“The BSP will continue to keep a watchful eye on the risks to the inflation outlook and will take necessary action to help ensure that inflation expectations remain firmly anchored to the target,” the monetary authority said yesterday.
Last week, BSP Governor Nestor A. Espenilla, Jr. signalled that the central bank is “ready to follow through” the two tightening moves it has implemented this year to quell inflation expectations.
Meanwhile, another trader said the peso strengthened as the dollar weakened further.
Reuters reported that the dollar index traded nearly flat against a basket of six major currencies at 94.361, well below the one-year high of 95.656 it touched on July 19.
“I think it’s more of a technical correction since last week, we saw strong numbers from the US, but more or less the market already priced in a strong number from them,” the trader said in a phone interview on Tuesday.
“At the same time, I think there were also flows from developed markets to emerging markets like us,” the second trader added.
For Wednesday, the first trader expects the peso to move between P52.95 and P53.15, while the other gave a P52.90-P53.20 range. — K.A.N. Vidal