Peso inches up before inflation data

The peso edged higher against the dollar on Tuesday as investors stayed cautious ahead of the release of January inflation data and key US labor figures.

It closed at PHP 58.89 a dollar, up 0.9 centavo from its PHP 58.899 finish on Monday, according to Bankers Association of the Philippines data posted on its website.

It opened slightly stronger at PHP 58.888. The peso traded within a narrow range, hitting an intraday best of PHP 58.83 and a low of PHP 58.93 against the greenback.

Dollar turnover rose to USD 1.08 billion from USD 773 million in the previous session.

The peso largely moved sideways as market participants waited for signals from upcoming US employment data and the local inflation report, a trader said by telephone.

A BusinessWorld survey of 18 economists yielded a median forecast of 1.8% for January inflation, within the Bangko Sentral ng Pilipinas’ (BSP) 1.4% to 2.2% projection. This would match December’s pace and slow from 2.9% in January last year.

If correct, inflation would have stayed below the BSP’s 2% to 4% target for an 11^th straight month, reinforcing expectations that price pressures remain manageable.

The peso also found support from softer global oil prices and easing geopolitical risks after reports of planned nuclear talks between the US and Iran, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

Lower oil prices tend to support the peso by reducing the country’s import bill, while easing global tensions help improve overall market sentiment.

For Wednesday, both the trader and Mr. Ricafort see the peso trading at PHP 58.80 to PHP 59 against the dollar, as markets digest inflation data and await clearer cues from the US economy. — Aaron Michael C. Sy