Peso falls, PSEi rises ahead of inflation data

The peso fell, but the stock market edged up slightly on Monday ahead of today’s February inflation data release.

The currency weakened 6 centavos to close at 54.88 pesos against the dollar, while the Philippine Stock Exchange’s benchmark index (PSEi) added 15.75 points, or 0.24 percent, to close at 6671.12.

The broader All Shares index also rose 8.64 points, or 0.24 percent, to 3573.06.

“Markets are anticipating a possible peak in inflation due to the higher denominator effect due to the anniversary of the peak in crude oil prices on the New York Mercantile Exchange … due to the Russian-Ukrainian war that began on February 24, 2023,” said Michael Ricafort, Chief Economist at Rizal Commercial Banking Corp.

“In addition, President Ferdinand “Bongbong” Marcos Jr… recently [signalled] the fact that there is no need for special powers to control prices may also have contributed to the positive mood to date,” he added.

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On the peso, Ricafort said the currency is “still relatively stable following recent signals from local monetary authorities that they are ready to use the tools available in the policy toolbox to help stabilize inflation, including tools to help stabilize pesos and the value of imports. “

Claire Alviar, a researcher at Philstocks Financial Inc., said investors were waiting for the February inflation data as it would give an indication of the direction of monetary policy.

“Investors are looking forward to this date as it hints at the decision of Bangko Sentral ng Pilipinas (BSP) on interest rates,” she said.

“If it exceeds January’s 8.7%, BSP could raise rates by 50 basis points to tame higher inflation,” she added.

Higher-than-expected inflation in January led to a 50 basis point hike in key interest rates. BSP said February could see an acceleration of as much as 9.3 percent or a weakening of up to 8.5 percent.

The peso opened at 54.80 pesos: $1 and fluctuated between 54.76 and 54.915 pesos. Volume reached $810 million, down from $1.286 trillion in the previous session.

On the stock market, all sectoral indices, except for holdings (down 0.10%), closed in positive territory. Services grew the most at 1.27 percent.

Volume was low, with just under 660 million shares worth 4.75 billion pesos changing hands.

There are more advances than declines, from 102 to 83, while 45 remained unchanged.