Peso may rise on rate cut view

The peso may continue to rise against the dollar this week amid rate cut bets at home and abroad following slower-than-expected Philippine headline inflation in June and data showing a cooling US jobs market.

The local unit closed at PHP 58.53 per dollar on Friday, strengthening by five centavos from its PHP 58.58 finish on Thursday, Bankers Association of the Philippines data showed.

This was the peso’s strongest showing in almost a month or since its PHP 58.52-a-dollar finish on June 7.

Week on week, the peso likewise rose by eight centavos from its PHP 58.61-per-dollar close on June 28.

Slower Philippine June inflation supported the peso on Friday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The June consumer price index (CPI) print strengthened the case for a Bangko Sentral ng Pilipinas (BSP) rate cut by next month, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

Headline inflation eased to 3.7% year on year in June, from 3.9% in May and 5.4% in the same month a year ago, the Philippine Statistics Authority reported on Friday.

This was within the BSP’s 3.4-4.2% forecast for the month and was slightly slower than the 3.9% median estimate in a BusinessWorld poll of 14 analysts. This also marked the seventh straight month that the CPI settled within the BSP’s 2-4% annual target.

The June CPI matched the 3.7% print in March and was the slowest in four months or since the 3.4% recorded in February.

For the first half, Philippine headline inflation averaged 3.5%, above the central bank’s 3.3% full-year forecast but still within its 2-4% annual goal.

BSP Governor Eli M. Remolona, Jr. earlier said the Monetary Board is “on track” and “somewhat more likely than before” to slash rates at its Aug. 15 policy meeting as he expects inflation to further ease this semester with the implementation of lower tariffs on rice.

For this week, the peso’s movement against the dollar will be driven by US nonfarm payrolls data released on Friday, Mr. Roces said.

US employment increased solidly in June, but government and healthcare services hiring made up about three-quarters of the payrolls gain and the unemployment rate hit a 2-1/2-year high of 4.1%, pointing to a slackening labor market that keeps the Federal Reserve on course to start cutting interest rates soon, Reuters reported.

Mr. Ricafort added that the market will also monitor June US consumer and producer inflation data to be released this week, as well as Fed Chair Jerome H. Powell’s semiannual testimony before the US Congress, which could provide hints on the US central bank’s policy path.

He expects the peso to move between PHP 58.40 and PHP 58.60 versus the dollar this week. — AMCS with Reuters