THE PESO is expected to trade sideways against the dollar this week ahead of the release of April Philippine inflation data and the US Federal Reserve’s policy meeting.
The local currency closed at P55.38 versus the greenback on Friday, climbing by 34 centavos from Thursday’s P55.72 finish, Bankers Association of the Philippines data showed.
Week on week, the peso rose by 64 centavos from its P56.02 finish on April 20.
The peso opened Friday’s session at P55.62 per dollar, which was also its worst showing. Its intraday best was at P55.32 versus the greenback.
Dollars traded went up to $1.24 billion on Friday from the $1.186 billion seen on Thursday.
The peso strengthened on Friday amid a spike in remittances before the long weekend and as market players trimmed their long dollar positions, a trader said in a Viber message.
Philippine financial markets are closed on Monday for Labor Day.
The peso also strengthened after the Bangko Sentral ng Pilipinas (BSP) said April inflation likely settled within the 6.3-7.1% range, slower than the 7.6% in March, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
If realized, inflation would surpass the BSP’s 2-4% target for the 13th consecutive month.
The lower end of the forecast range would match the 6.3% in August 2022 and would be the slowest print in 10 months or since June last year, when it stood at 6.1%.
April consumer price index data will be released on May 5, Friday.
Mr. Ricafort said the BSP could pause increasing borrowing costs if inflation slows in April.
BSP Governor Felipe M. Medalla last month said if inflation eases further in April, the Monetary Board will likely consider pausing its tightening cycle at their May 18 review.
The Philippine central bank has increased borrowing costs by 425 basis points (bps) since May 2022 to help bring down elevated inflation. Its policy rate is now at 6.25% — the highest in nearly 16 years.
The peso was also supported by lower global crude oil prices recently, Mr. Ricafort added.
Oil prices steadied on Thursday after dropping almost 4% on Wednesday, with Brent crude edging up 18 cents or 0.23% to $77.87 a barrel by 1344 GMT, while US West Texas Intermediate crude rose by 12 cents or 0.16% to $74.42, Reuters reported.
For this week, the trader said the peso could move sideways, depending on the April consumer price index data, Friday, as well as the Fed’s meeting on May 2-3.
The Fed has hiked borrowing costs by a total of 475 bps since March 2022, with its target interest rate now at a range between 4.75% and 5%.
Its latest move was a 25-bp increase in its March 21-22 meeting.
Markets expect the US central bank to raise rates by another 25 bps this week.
Data on the Fed’s preferred inflation gauge released on Friday will also affect the peso’s movement against the dollar this week, the trader added.
The US Commerce department’s personal consumption expenditures (PCE) price index showed that consumer spending remained unchanged in March, with the index gaining 0.1% in March, the smallest increase since last July, after rising 0.3% in February.
In the 12 months through March, the PCE price index increased 4.2%. That was the smallest advance since May 2021 and followed a 5.1% rise in February.
The trader sees the peso trading between P55 and P56 per dollar this week, while Mr. Ricafort gave a forecast range of P55.10 to P55.60. —AMCS with Reuters