THE PESO dropped versus the dollar on Tuesday as headline inflation surged above 5% in May and amid high global oil prices.
The local unit closed at P52.95 on Tuesday, shedding nine centavos from its P52.86 finish on Monday, Bankers Association of the Philippines data showed.
The peso opened Tuesday’s session at P52.90 against the dollar. Its weakest showing was at P52.975, while its intraday best was at P52.87 versus the greenback.
Dollars exchanged decreased to $745.120 million on Tuesday from $1.07 billion on Monday.
The peso weakened after the latest headline inflation from the Philippine Statistics Authority, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.
“The peso weakened, tracking the increase in international oil prices from global demand optimism after Beijing loosened major coronavirus lockdown restrictions,” a trader said in an e-mail.
Inflation quickened to its fastest pace in over three years in May due to higher food and transport costs, preliminary data from the Philippine Statistics Authority released on Tuesday showed.
Headline inflation in May surged by 5.4% year on year from 4.9% in April and 4.1% a year ago. This matched the 5.4% median estimate in a BusinessWorld poll conducted late last week, which was the midpoint of the 5-5.8% outlook range given by the Bangko Sentral ng Pilipinas for that month.
May’s headline print was also the fastest since the 6.1% seen in November 2018.
Year to date, inflation has averaged 4.1%. This is lower than the central bank’s 4.6% forecast but above its 2-4% target for the year.
Meanwhile, oil prices inched higher as demand for fuel increased and supplies tightened amid relaxed mobility restrictions in China, Reuters reported.
Brent crude futures were up 28 cents or 0.2% at $119.79 barrel at 0601 GMT.
US West Texas Intermediate crude futures were up 31 cents or 0.3% at $118.81 a barrel.
Beijing and Shanghai have been returning to normal in recent days after two months of lockdowns to curb the surge of the Omicron variant.
Traffic bans were lifted and restaurants were opened for dine-in service on Monday in most parts of Beijing.
For Wednesday, Mr. Ricafort and the trader expect the peso to move between P52.80 and P53 against the dollar. — Keisha B. Ta-asan with Reuters