Peso drops further as inflation picks up

THE PESO dropped versus the greenback yesterday as inflation picked up further last month.

The local unit closed at P51.33 against the dollar on Tuesday, dropping five centavos from Monday’s P51.28 finish.

The peso opened stronger at P51.15, which was its intraday best. Its weakest showing for the day was at P51.35 against the dollar.

Dollars traded on Tuesday totalled $ 533.7 million, up from the previous day’s $ 330.95 million.

Traders attributed the weakening of the local unit to the inflation data released by the Philippine Statistics Authority yesterday, which showed prices of widely used goods rising by 3.5% last month, a three-year high.

“The peso decline might have been due to the inflation rate deemed to be the highest in a while. However, inflation is expected and is assumed manageable,” Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines (UnionBank), said in an e-mail.

Aside from inflation data, Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines (Landbank), also attributed the sideways movement of the peso to increasing uncertainty on who will comprise the US Federal Reserve’s Federal Open Market Committee (FOMC) in the coming months.

“The peso just moved sideways today, as Philippine inflation data came in aligned with expectations and amid uncertainties concerning the future composition of the FOMC,” he noted on Tuesday.

He added that the likely interest rate hike by US Federal Reserve next month may temper the weakening of the local currency.

UnionBank’s Mr. Asuncion and other traders are expecting the peso to move between P51 and P51.50 today.

Landbank’s Mr. Dumalagan gave a slimmer forecast range of P51.25 to P51.45.

Meanwhile, the Bangko Sentral ng Pilipinas said peso trading, as well as other operations of the central bank such as clearing and settlement and cash servicing, will continue with normal operations on Nov. 13 to 15.

This, despite Malacañang declaring such dates in Metro Manila, Bulacan and Pampanga as non-working holidays to make way for the Association of Southeast Asian Nations Summit.

Meanwhile, other emerging Asian currencies rebounded on Tuesday as a dollar rally lost some steam on lower US Treasury yields and investors were skeptical that the US Congress will quickly pass a major tax bill. •