THE PESO may weaken this week as the dollar continues to strengthen, with the US Federal Reserve chief saying they are committed to keeping inflation low and ahead the release of August US consumer price index (CPI) data.
The local unit closed at P56.82 per dollar on Friday, rebounding by 36 centavos from its P57.18 finish on Thursday, Bankers Association of the Philippines data showed.
However, week on week, the peso lost five centavos from its P56.77 finish a week earlier.
The peso opened at P57.05 per dollar on Friday. Its weakest showing was at P57.07, while its intraday best was at P56.78.
Dollars exchanged were steady at $1.15 billion on Friday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the peso recovered against the dollar on Friday amid a “healthy correction” following its six-day decline that saw it logging new record lows for five straight sessions.
This was “in line with the healthy downward correction of the US dollar versus major global currencies recently, as well as some measures by some Asian central banks to stabilize their respective local currencies after the recent increase in the US dollar amid hawkish signals from the Fed and the European Central Bank,” Mr. Ricafort said.
For this week, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the market will look at US inflation data to be released on Tuesday, as this could affect the Fed’s policy path moving forward.
Fed Chair Jerome H. Powell said at the Jackson Hole symposium last month that the US central bank will hike interest rates as needed and keep them high for some time to bring inflation down.
On Thursday, Mr. Powell said the central bank is “strongly committed” to fighting inflation.
The Federal Open Market Committee is set to meet on Sept. 20-21. It has raised rates by 225 basis points (bps) so far since March, including back-to-back 75-bp hikes in June and July.
Mr. Asuncion added that the market may remain cautious ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting on Sept. 22, where he sees another aggressive hike.
The BSP has increased borrowing costs by 175 bps since May to keep rising prices in check.
Headline inflation eased to a two-month low of 6.3% year on year in August from the near four-year high of 6.4% in July, However, this was faster than the 4.4% recorded in August 2021 and marked the fifth consecutive month that inflation went above the BSP’s 2-4% target.
In the first eight months, inflation averaged 4.9%, faster than the 4% a year ago. Still, this is below the BSP’s 5.4% full-year inflation forecast.
For this week, Mr. Asuncion expects the peso to move within P56.90 to P57.40 per dollar, while Mr. Ricafort gave a forecast range of P56.50 to P57. — Diego Gabriel C. Robles