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Peso tumbles to P55-per-dollar level as headline inflation surges in Jan.


THE PESO sank to the P55-per-dollar level on Tuesday as January headline inflation was faster than expected and amid hawkish signals from the US Federal Reserve.

The local currency closed at P55.085 versus the greenback on Tuesday, declining by 69.5 centavos from Monday’s P54.39 finish, data from the Bankers Association of the Philippines showed.

The peso opened Tuesday’s trading session at P54.65 per dollar. Its weakest showing was at P55.10, while its intraday best was at P54.60 against the greenback.

Dollars traded rose to $1.274 billion from $1.053 billion on Monday.

The peso declined following the release of January inflation data and hawkish signals from a Fed official, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The peso weakened significantly after the Philippine headline inflation for January 2023 was reported at 8.7%, surpassing market and central bank’s expectations,” a trader said in an e-mail.

Headline inflation was at a 14-year high of 8.7% in January, faster than the 8.1% in December and 3% a year ago.

This also surpassed the 7.6% median estimate in a BusinessWorld poll conducted last week and the 7.5% to 8.3% forecast range given by the Bangko Sentral ng Pilipinas (BSP) for the month.

Meanwhile, Atlanta Federal Reserve Bank President Raphael Bostic told Bloomberg that the Fed may need to lift borrowing costs higher than previously anticipated 25 basis points (bps) given the unexpectedly strong jobs data in January.

The US central bank hiked borrowing costs by 25 bps at its Jan. 31 to Feb. 1 meeting, bringing the fed funds rate to a 4.5% to 4.75% range, the highest since 2007.

The Fed has now hiked rates by 450 bps since March 2022.

For Wednesday, the trader said the peso could weaken further against the dollar on expectations of hawkish remarks from Fed Chair Jerome H. Powell overnight.

The trader expects the peso to move between P55 and P55.25 per dollar on Wednesday, while Mr. Ricafort gave a wider forecast range of P54.90 to P55.20. — AMCS

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