Peso to stay rangebound

The peso is expected to trade sideways against the dollar this week following the surprise uptick in US consumer inflation in December. 

The local currency closed at PHP 55.911 versus the dollar on Friday, appreciating by 3.9 centavos from Thursday’s PHP 55.95 finish, data from the Bankers Association of the Philippines’ website showed.

Week on week, however, the peso weakened by 21.1 centavos from its PHP 55.70 close on Jan. 5.

The peso was better supported against the dollar following the faster-than-expected rise in US inflation, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

The consumer price index (CPI) rose 0.3% last month after nudging up 0.1% in November, the Labor department’s Bureau of Labor Statistics said, Reuters reported.

In the 12 months through December, the CPI rose 3.4% after increasing 3.1% in November. Economists polled by Reuters had forecast the CPI would gain 0.2% on the month and climb 3.2% on a year-on-year basis.

Inflation averaged 4.1% in 2023, down from 8% in 2022.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said core inflation in the US, which eased to 3.9% year on year from 4% in November, could still justify Fed rate cuts in the second half of the year.

Market players are still pricing in rate cuts of more than 150 basis points this year, he said.

The peso appreciated on Friday after President Ferdinand R. Marcos, Jr. announced a new Finance chief, Mr. Ricafort added.

Former lawmaker Ralph G. Recto took his oath as Department of Finance secretary on Friday. He replaced Benjamin E. Diokno, who was sworn in as a member of the central bank’s Monetary Board.

Mr. Recto was previously a member of the country’s economic team as chief of the National Economic and Development Authority in 2008.

For this week, Mr. Roces said the peso could remain “range-bound” before US data on retail sales and the release of the Fed Beige Book, which a report on economic conditions in the US.

Market players will also look at the latest remittances and overall balance of payments data to be released by the Philippine central bank this week, Mr. Ricafort added.

He expects the local unit to move from PHP 55.60 to PHP 56.10 per dollar this week. — Keisha B. Ta-asan with Reuters