Peso up on January inflation uptick

The Philippine peso appreciated against the dollar on Friday as the latest inflation print was seen to be favoring a hawkish monetary policy stance.

The local currency gained 1 centavo to close at P48.07:$1 from Thursday’s finish at 48.08.

This was the strongest showing for the peso in more than four years since September 23, 2016, when it closed at P47.99:$1.

“The peso exchange rate is slightly stronger today vs. the US dollar... after the latest inflation data at the two-year high of 4.2% that could increase the odds of any upward adjustment on the local policy rate hike from the current record low of 2%, or at least less odds of policy rate cut at the moment,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said.

Inflation clocked in at 4.2% last month, its fourth straight month of acceleration due to a faster increase in food commodities, particularly pork and vegetables amid supply constraints brought by African swine fever and typhoons in the latter part of last year.

“The recent spike in inflation has been largely due to higher food and transportation prices, or mostly supply-side factors or reduced supply, amid signals that any change in monetary policy could only happen if there would be second-round inflation effects in terms of higher prices of other affected products and services in the economy,” Ricafort said.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno, however, thumbed down any possibility of monetary policy tightening as the uptrend in inflation was seen as transitory and could be addressed by “non-monetary interventions that ease domestic supply constraints. — DVM, GMA News