Peso weakens as market waits for inflation data

THE PESO edged lower against the dollar on Monday as cautious trading prevailed ahead of the release of domestic inflation data and key US economic indicators.

It closed at P58.899 a dollar, weakening by 3.9 centavos from Friday’s P58.86 finish, according to Bankers Association of the Philippines data posted on its website.

The peso opened at P58.90 and moved within a narrow range, trading as strong as P58.86 and as weak as P58.915 during the day. Trading activity thinned, with dollar turnover falling to $773 million from $1.267 billion in the previous session.

“The dollar-peso closed a tad higher but traded mostly sideways within a narrow range as players stayed on the sidelines awaiting key US job data and local inflation,” a trader said by telephone.

Market participants are focused on January inflation figures due on Feb. 5. A BusinessWorld survey of 18 economists yielded a median forecast of 1.8%, within the Bangko Sentral ng Pilipinas’ (BSP) 1.4% to 2.2% projection. Inflation would be unchanged from December and slower than the 2.9% recorded a year earlier.

January could mark the 11^th straight month that inflation stayed below the BSP’s 2% to 4% target, supporting expectations that price pressures remain manageable despite peso volatility and higher global energy prices.

The peso also tracked a modest rebound in the dollar after US President Donald J. Trump named Kevin Warsh as the next chairman of the US Federal Reserve. The announcement prompted some repositioning in global currency markets.

The dollar index, which measures the greenback against a basket of major currencies, edged higher on Monday as investors assessed the potential policy implications of the Fed leadership change and awaited fresh labor market data from the US.

For Tuesday, the trader said the peso is likely to trade at P58.80 to P59 against the dollar.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., shared a similar outlook, citing continued range-bound trading ahead of inflation data.  — Aaron Michael C. Sy