The peso weakens to its lowest level in 19 months

The PESO fell to a 19-month low against the dollar on Monday on expectations that Philippine headline inflation would pick up in May.

The local unit closed at P58.68 per dollar on Monday, weakening 17 centavos from the P58.51 FThis was evident from data from the Bankers Association of the Philippines on Friday.

This was the peso’s worst performance in 19 months or since its closing rate of P58.80 per dollar on November 3, 2022.

The local unit is now P3.31 lower than its end-2023 closing rate of P55.37 against the dollar.

The peso opened Monday’s session stronger at P58.47 against the dollar. The price climbed to P58.41, while the worst intraday position was P58.70 against the dollar.

Dollars exchanged fell from $1.55 billion on Friday to $1.32 billion on Monday.

“The peso weakened amid potential higher Philippine inflation in May 2024,” a trader said in an email.

Head inFInflation may have accelerated for a fourth month in a row in May due to higher electricity costs, analysts said.

a Business a poll of 16 analysts yielded an average estimate of 4% for May’s consumer price index (CPI), within the central bank’s forecast of 3.7-4.5% for the month.

If realized, MayFGrowth would be faster than the 3.8% in April, but slower than the 6.1% in the same month a year earlier.

This would be the sixth month in a row that inflation was within the central bank’s target range of 2-4%.

The Philippine Statistics Authority will release May CPI data on Wednesday (June 5).

The peso was also dragged down Monday by a generally stronger dollar, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort. in a Viber message.

The dollar held steady on Monday as investors warmed to the idea of ​​the US getting inFAccording to Reuters, interest rates may have slowed enough to allow the US Federal Reserve to cut rates in 2024.

The dollar index, which measures the U.S. currency against six others, rose 0.1% to 104.67. The index fell 1.56% in May, but is up 3% this year.

The dollar posted its first monthly decline of the year in May, pressured by shifting expectations about when the US central bank will cut rates and by how much, with markets pricing in 37 basis points of Fed rate cuts this year.

Data on Friday showed a measure of consumptionFInflation rose modestly in April and price pressures remained above the central bank’s 2% target.

Traders estimate about a 60% chance of a rate cut in September, up from 49% before the report.

Before Tuesday, the trader said the peso could depreciate further due to likely stronger U.S. manufacturing Purchasing Managers Index data for May, due to be released tonight.

The trader sees the peso moving between P58.55 and P58.80 on Tuesday, while Mr. Ricafort expects it to fluctuate between P58.55 and P58.75 per dollar. — AMC Sy of Reuters