Peso weakens as BSP expects faster inflation

BW FILE PHOTO

THE PESO weakened against the greenback on Friday as the central bank said it expects faster inflation this year and in 2021.

The local unit closed at P48.085 per dollar on Friday, shedding four centavos from its P48.045 finish on Thursday, data from the Bankers Association of the Philippines showed.

Week on week, it also depreciated by 1.5 centavos from its P48.07-per-dollar close on Dec. 11.
The peso opened Friday’s session at P48.05 per dollar. It reached a high of P48.04 while its closing level was its weakest showing for the day.

Dollars traded rose to $797.82 million on Friday from $674.59 million the previous day.

The peso weakened versus the greenback due to risk-off sentiment following the Bangko Sentral ng Pilipinas’ (BSP) new inflation forecasts, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

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“The peso exchange rate closed weaker after higher inflation estimates by the BSP,” Mr. Ricafort said in a text message.

The central bank on Thursday kept benchmark interest rates untouched, as expected. However, it revised upwards its inflation forecasts for 2020 and 2021 to 2.6% (from 2.5%) and 3.2% (from 2.7%), respectively.

BSP Deputy Governor Francisco G. Dakila, Jr. said the revised outlook was due to the faster increase in food prices and the recent uptick in global oil prices.

Meanwhile, a trader attributed the peso’s depreciation to cautiousness in the market ahead of the holidays.

“The peso depreciated from some market caution ahead of possible developments over the weekend and from the upcoming holiday season,” the trader said in an email. — LWTN

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