THE PESO strengthened versus the dollar on Tuesday despite profit taking after the release of November inflation data that cemented expectations of another rate hike from the Bangko Sentral ng Pilipinas (BSP) this month.
The local unit closed at P55.975 per dollar on Tuesday, gaining 4.5 centavos from its P56.02 finish on Monday, data from the Bankers Association of the Philippines showed.
The peso opened Tuesday’s session slightly weaker at P56.06 against the dollar. Its worst showing was at P56.11, while its intraday best was at P55.95 versus the greenback.
Dollars exchanged declined to $776.56 million on Tuesday from $1.15 billion the previous trading day.
The peso appreciated on Tuesday as inflation picked up in November, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Quicker inflation last month could prompt the Philippine central bank to continue hiking borrowing costs on Dec. 15 as it also seeks to keep an interest rate differential with the US Federal Reserve, Mr. Ricafort said.
The BSP has raised its key rate by 300 basis points (bps) since May to 5% to curb soaring inflation and support the currency, while the US central bank has hiked by 375 bps since March, bringing the fed funds rate to a range of 3.75% to 4%.
Preliminary data from the Philippine Statistics Authority showed inflation picked up to 8% in November from 7.7% in October and 3.7% in November 2021.
It was the fastest pace since the 9.1% in November 2008. Last month’s print also breached the BSP’s 2-4% annual target for the eighth consecutive month.
For the 11-month period, inflation averaged 5.6%, still lower than the BSP’s 5.8% full-year forecast.
“I think the higher-than-expected November inflation provided an opportunity for profit taking, although profit taking has been ripe since the consecutive sessions of declines,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a Viber message.
“Today, it moved sideways, but according to our traders, we can’t rule out profit taking that may have ensued,” he said, adding that dollar inflows could still increase as the holiday season draws near.
The peso also strengthened after the local stock market gained sharply recently, Mr. Ricafort added.
The benchmark Philippine Stock Exchange index rose by 232.25 points or 3.6% to close at 6,674.38 on Tuesday, while the broader all shares index climbed by 73.79 points or 2.16% to 3,477.72.
For Wednesday, Mr. Ricafort gave a forecast range of P55.85 to P56.05, while Mr. Asuncion expects the local unit to move within P55.60 to P56 against the dollar. — K.B. Ta-asan