Peso weakens as market awaits US CPI report

THE PESO weakened versus the dollar on Wednesday ahead of the release of US inflation data.

The local unit closed at P55.665 against the greenback on Wednesday, losing seven centavos from its P55.595 finish on Tuesday, Bankers Association of the Philippines data showed.

The peso opened at P55.67 versus the dollar on Wednesday. Its weakest showing was at P55.85, while its intraday best was at P55.65 against the greenback.

Dollars exchanged declined to $871.6 million on Wednesday from $1.36 billion on Tuesday.

“The peso depreciated amid elevated market expectations ahead of the US consumer inflation report for July 2022,” a trader said in an e-mail. 

The July US consumer price index report was scheduled to be released overnight. US inflation in June stood at a 40-year high of 9.1%.

The peso also weakened a day after the release of softer second-quarter economic growth data that could lead to less aggressive rate hikes this year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Preliminary data released by the Philippine Statistics Authority showed gross domestic product grew by 7.4% year on year in the April to June period, slower than the 12.1% expansion in the same period last year and the revised 8.2% growth in the first quarter.

Meanwhile, offsetting positive factors for the peso include gains on the local stock market and stronger foreign direct investments data, Mr. Ricafort said. 

“The local currency might remain weak on similar expectations from the producer inflation report,” the trader said. 

For Thursday, the trader expects the local unit to move within P55.55 to P55.80 per dollar, while Mr. Ricafort gave a forecast range of P55.55 to P55.75. — K.B. Ta-asan