Peso may move sideways before August inflation data

The peso could trade sideways against the dollar this week ahead of the release of August inflation data.

The local unit closed at PHP 56.595 versus the dollar on Thursday, strengthening by 13 centavos from Wednesday’s PHP 56.725 finish, data from the Bankers Association of the Philippines’ website showed.

Week on week, however, the peso dropped by 2.50 centavos from its PHP 56.57 per dollar finish on August 25.

Trading was suspended on Friday as Malacañang suspended work in government offices due to inclement weather.

For this week, the peso could stay at the PHP 56-per-dollar level ahead of the release of the August consumer price index (CPI) report, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A BusinessWorld poll of 18 analysts yielded a median estimate of 4.9% for August headline inflation, close to the lower end of the central bank’s 4.8% to 5.6% forecast for the month.

If realized, this would be faster than the 4.7% print in July, but lower than the 6.3% seen in August 2022.

It would mark the 17^th straight month of inflation exceeding the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target.

August inflation data will be released on September 5, Tuesday.

Bets on the US Federal Reserve’s next move could also affect the peso’s movement, as this could be matched by the BSP, Mr. Ricafort added.

Financial markets are now betting the central bank is done raising rates and may start cutting them next year, according to CME Group’s FedWatch Tool, Reuters reported. Futures tied to the Fed’s policy rate show only a slight chance of a rate hike at the Sept. 19-20 meeting.

Since March 2022, the Fed has raised its policy rate by 525 basis points (bps) to the current 5.25%-5.5% range.

Meanwhile, the BSP kept its policy rate at a near 16-year high of 6.25% for a third straight meeting last month.

The BSP raised borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation.

The Monetary Board will next meet on September 21 to review policy.

Mr. Ricafort expects the peso to range from PHP 56.30 to PHP 56.80 per dollar this week. — AMCS with Reuters