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Peso may rise on inflation expectations

peso may rise on inflation expectations 816x445 - Peso may rise on inflation expectations

THE PESO will likely strengthen further against the greenback this week on expectations of slow inflation and as the second economic stimulus bill awaits the signature of President Rodrigo R. Duterte.

The local unit closed at P48.485 versus the greenback on Friday, appreciating by 14.50  centavos from Thursday’s P48.63 finish, data from the Bankers Association of the Philippines showed.

Week on week, the peso also surged from its P48.68-per-dollar close on Aug. 20.

Markets are closed on Monday for National Heroes’ Day

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the local unit may move within P48.40 to P48.70 versus the dollar this week.

Mr. Asuncion said he sees high demand for peso as inflation remains manageable.

“Prices in August may reflect a generally benign inflation. Based on our forecast, probably, it will be at 2.9%,” he said in an e-mail.

Inflation likely ranged at 2.5% to 3.3%, mainly driven by an increase in oil prices, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Friday.

The Philippine Statistics Authority will release August inflation data on Sept. 4.

Last month, the consumer price index rose 2.7%, quicker than the 2.5% in June as well as the 2.4% in July 2019. Year to date, inflation averaged 2.5%.

The central bank last week raised its 2020 inflation forecast to 2.6% from the 2.3% it gave in June, still well within its 2-4% target.

Mr. Asuncion, however, said expectations of higher unemployment may put some downward pressure on the local currency.

“On the other hand, third-quarter unemployment rate which is anticipated to be still double-digit may counter the peso’s appreciation,” he said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said progress on the P165-billion stimulus fund for the poor and other sectors under the Bayanihan II bill will also affect the peso-dollar trading this week. He expects the local unit to strengthen to the P48 to P48.25 levels.

Mr. Ricafort added further discussions on Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) bill could also support the peso.

“Any progress on other legislative measures such as the CREATE Bill that would immediately cut corporate income tax rate to 25% from the current 30% and the FIST Bill, among others, would all help improve economic recovery prospects, especially as the economy further re-opens from lockdown,” Mr. Ricafort said.

The Financial Institutions Strategic Transfer (FIST) bill aims to set up corporations that will acquire, manage and sell nonperforming loans and stagnant property assets of banks. — K.K.T. Jose

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