Peso drops vs dollar as market expects faster September inflation

The peso depreciated against the dollar on Monday due to expectation of faster September inflation.

The local currency closed at PHP 56.775 versus the dollar on Monday, weakening by 20 centavos from Friday’s PHP 56.575 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Monday’s session stronger at PHP 56.70 per dollar. Its intraday best was at PHP 56.67, while its weakest showing was at PHP 56.80 against the greenback.

Dollars traded went down to USD 1.15 billion on Monday from the USD 1.19 billion on Friday.

“The peso weakened amid market expectations of a potential uptick in domestic inflation for September,” a trader said in a text message.

A BusinessWorld poll of 17 analysts yielded a median estimate of 5.4% for September inflation, near the low end of the Bangko Sentral ng Pilipinas’ (BSP) 5.3-6.1% forecast for the month.

If realized, September inflation would pick up from the 5.3% print in August but would be lower than 6.9% in the same month in 2022.

September will also be the 18^th straight month that inflation was above the BSP’s 2-4% target for the year.

The Philippine Statistics Authority will release September inflation data on Thursday.

The peso weakened due to broad dollar strength, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

The US dollar index edged back from its recent 10-month high and was last at 106.21, after clocking its best quarterly performance in a year thanks to persistently hawkish US Federal Reserve rhetoric and a surge in US Treasury yields, Reuters reported.

For Tuesday, the trader said the peso could weaken further due to potentially hawkish signals from US Federal Reserve Chair Jerome H. Powell.

The trader sees the peso moving between PHP 56.65 and PHP 56.90 per dollar on Tuesday, while Mr. Ricafort sees it ranging from PHP 56.65 to PHP 56.85. — AMCS with Reuters