Peso extends climb as inflation eases
THE PESO rallied further on Tuesday as inflation eased to a three-year low in October.
The local unit finished trading at P50.41 against the greenback on Monday, stronger by nine centavos from its P50.50 per dollar close on Monday.
The peso started trading at P50.55 versus the dollar. Its weakest point for the day was at P50.63, while its best showing against the greenback was at P50.40.
Dollars traded on Tuesday rose to $1.188 billion from $869.5 million seen on Monday.
“Strength may have come from the three-year low inflation print for October. This is aside from the favorable prospects from the progress of the US-China trade negotiations,” UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion said in a text message.
Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort added that the peso’s strength came after signals of a pause in further monetary easing from the central bank.
“The peso closed stronger...after the latest inflation data eased to a 3.5-year low of 0.8% and a day after the BSP Governor [Benjamin E.] Diokno signalled no more cuts in local policy rates and in banks’ RRR (reserve requirement ratio) for the rest of 2019 even after the [latest] US Federal Reserve rate cut, thereby improving the peso’s interest rate differential and allure versus the US dollar,” Mr. Ricafort said in a text message.
Inflation eased to 0.8% in October from the 0.9% in September on the back of a drop in prices of food commodities, oil, transportation and utilities, according to the Philippine Statistics Authority.
Last month’s print is near the lower end of the Bangko Sentral ng Pilipinas’ forecast inflation range for the month which was from 0.5% to 1.3% and also matched the median estimate of 0.8% in BusinessWorld’s poll of 14 economists.
Meanwhile, China has been calling on US President Donald J. Trump to remove more tariffs imposed in September as part of the “phase one” of the trade deal between the two biggest economies in the world, people familiar with the negotiations told Reuters on Monday.
For today, UnionBank’s Mr. Asuncion said the peso will likely play around the P50.20-50.50 band versus the dollar, while RCBC’s Mr. Ricafort expects the local unit to trade within P52.2052.50.