Peso may decline vs dollar on expectations of faster Sept. inflation

THE PESO may weaken anew versus the dollar this week amid expectations of faster September inflation.

The local unit closed at P58.625 per dollar on Friday, gaining 34.5 centavos from its P58.97 finish on Thursday, Bankers Association of the Philippines data showed. 

Week on week, the local unit also shed 12.5 centavos from its P58.50 close on Sept. 23.

The peso opened Friday’s session at P58.60 per dollar. Its intraday best was at P58.53, while its weakest showing was at P58.79 against the greenback.

Dollars traded rose to $1.05 billion on Friday from $902.86 million on Thursday.

The local unit strengthened on Friday as the central bank tightened reporting requirements for foreign exchange transactions, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The peso also became stronger after the narrowest budget deficit data in 4 months and stronger bank loans growth data,” Mr. Ricafort added.

For the week, the key trading driver will be the September inflation data to be released on Wednesday, Oct. 5, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

Mr. Asuncion said quicker inflation will affect market sentiment as it could prompt the Bangko Sentral ng Pilipinas (BSP) to increase borrowing costs further at the Monetary Board’s Nov. 17 and Dec. 15 meetings.

The central bank has raised benchmark interest rates by 225 bps since May as it seeks to rein in inflation.

Analysts expect the consumer price index to have peaked anew in September amid the peso’s depreciation, higher electricity rates and rising food prices.

A BusinessWorld poll of 13 analysts yielded a median estimate of 6.7% for September headline inflation, within the BSP’s 6.6-7.4% estimate. This would be faster than the 6.3% seen in August.

It would also be higher than the BSP’s 2-4% target and 5.6% forecast for the year.

For this week, Mr. Ricafort gave a forecast range of P58.30 to P58.80, while Mr. Asuncion expects the local unit to move within P58.70 to P59.20 a dollar. — K.B. Ta-asan