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Peso down as inflation data dampen hawkish BSP hopes


THE PESO weakened against the dollar on Tuesday, with investors expecting the central bank to deliver a smaller hike this month after headline inflation slowed in February.

The local currency closed at P55 versus the greenback on Tuesday, down by 12 centavos from Monday’s P54.88 finish, data from the Bankers Association of the Philippines’ website showed.

The peso opened Tuesday’s trading session at P55.03 per dollar. Its intraday best was at P54.99, while its worst showing was at P55.15 against the greenback.

Dollars traded went up to $896.8 million on Tuesday from the $810.1 million recorded on Monday.

The peso dropped against the dollar as slower inflation in February could cause the Bangko Sentral ng Pilipinas (BSP) to opt for a smaller rate increase in its March 23 policy meeting, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The peso weakened as the surprise deceleration in local inflation dampened expectations of a stronger BSP policy rate hike this month,” a trader likewise said in an e-mail.

Headline inflation eased slightly to 8.6% in February from the 14-year high of 8.7% seen the prior month. Still, this was faster than the 3% recorded in February 2022.

Last month’s print was below the 8.9% median in a BusinessWorld poll conducted last week, and fell within the 8.5-9.3% estimate given by the BSP.

The central bank hiked benchmark interest rates by 50 basis points (bps) in its Feb. 16 review, bringing the key rate to 6%. The move brought cumulative increases since May 2022 to 400 bps.

BSP Governor Felipe M. Medalla earlier said they could consider raising borrowing costs by 25 bps or 50 bps at this month’s policy meeting.

For Wednesday, investors will take their cue from US Federal Reserve Chair Jerome H. Powell’s semi-annual speech on monetary policy to the US Senate overnight.

The trader and Mr. Ricafort expect the peso to trade between P54.90 and P55.10 per dollar on Wednesday. — AMCS

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