The peso climbed to a month-high against the US dollar Thursday, on investors’ anticipation that President Rodrigo Duterte’s visit to China will lift the economy.
The peso gained six centavos to close at 48.10 a greenback Thursday from 48.16 Wednesday. It was the peso’s strongest level since it settled at 47.99 on Sept. 23, 2016. Total volume turnover reached $525.5 million Thursday compared to $654.5 million Wednesday.
“The peso’s recent outperformance of other Asian currencies [from last Friday] is a result of expectations that the China visit of President Duterte would bear significant economic gains for the Philippines,” ING Bank Manila senior economist Joey Cuyegkeng said in a statement.
He said underlying the positive performance of the peso was the government’s focus on the economic needs of the country after more than 100 days of the administration.
“With the China visit’s implied focus on economy, [the] market seems to be giving the administration a positive signal,” Cuyegkeng said.
Meanwhile, the Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, said it expected a faster inflation rate in the fourth quarter on higher oil prices.
“Inflation is projected to increase slightly towards the low end of the target range [of 2 to 4 percent] in the fourth quarter of the year, driven by higher oil prices, the above-trend growth in domestic economic activity, and the impact of positive base effects,” according to the highlights of the latest policy meeting held on Sept. 22 and released Thursday.
Latest baseline forecasts showed that average inflation would settle below the low end of the government’s target range of 2 percent to 4 percent for 2016 and rise to near the midpoint of the target range in 2017 and 2018.
“The risks to future inflation appear to be on the upside. Slower global economic activity poses the main downside risk to the inflation outlook, while pending petitions for adjustments in electricity rates along with the proposed adjustment in the excise tax rates of petroleum products [and possible knock-on effects on transport fares] constitute the main upside risks to the inflation,” the Monetary Board said.
Inflation in September 2016 accelerated to 2.3 percent from 1.8 percent in August, the fastest in 18 months.