Peso weakens to

The peso-US dollar exchange rate hit an intra-day high of R51.57 Friday and closed at R51.45, stronger than the previous day’s R51.53.

The peso opened high at R51.48 before the balance between supply and demand kept the local currency from depreciating further.

The market had anticipated the peso to stay at 51.50 late in the week, commented Metrobank Research, but it stayed below this level since the strong corporate demand for the greenback “squeezed out interbank shorts” within a trading day.

ING Bank senior economist Joey Cuyegkeng has noted that with enough US dollar in the market, the peso is back to the high R51 level. He expects the peso to remain in this range with the market predicting the Bangko Sentral ng Pilipinas (BSP) could decide to do a “pre-emptive move to stabilize inflation expectations.”

The central bank forecasts inflation to hit 3.2 percent average for both 2017 and 2018 while the market has a higher expectation of 3.4 percent for this year and 3.5 percent in 2018.

BSP Governor Nestor A. Espenilla Jr. has said that inflation environment will continue to be manageable and within expectations, affording the BSP the space to maintain a stable monetary policy agenda.

September’s 3.4 percent inflation rate – a five-month high – is within the BSP’s 2.8 percent to 3.6 percent forecast, taking into consideration increased prices of rice, fuel and electricity, as well as the peso’s weakness.

Espenilla has also noted that the peso at R51 has apparently stabilized and that

at this level the pass-through effect on inflation is “very minimal.”

The peso exchange rate is marketdetermined and flexible and that the BSP has allowed the peso its “modest and gradual depreciation,” said Espenilla.