Peso weakens vs dollar on strong US CPI report

THE PESO weakened against the dollar on Wednesday due to strong US inflation data and offshore geopolitical noise.

The local currency ended yesterday’s session at P52.07 versus the greenback, three centavos weaker than its P52.04-per-dollar finish on Tuesday.

The peso opened the session slightly weaker at P52.06 per dollar. Its intraday low stood at P52.12, while its best showing was at P52.02 against the greenback.

Dollars traded rose to $500.35 million from the $359.8 million logged in the previous session.

A trader attributed the slightly weaker peso to strong US inflation data amid geopolitical noise there.

“The peso weakened today following strong US inflation data released last Tuesday night despite continued geopolitical noise,” the trader said in an e-mail on Wednesday.

The US consumer price inflation rose in February, well within expectations, the Labor Department reported on Tuesday.

Excluding food an energy prices, the consumer price index (CPI) rose 0.2% in February month-on-month for both headline and core gauges, in line with the market consensus.

Meanwhile, the headline CPI rose 2.2% in the 12 months ending February, while the core index increased 1.8% from the same period last year.

The trader said the peso slightly weakened amid “continued geopolitical noise concerning firing of US Secretary of State Rex Tillerson and news of possible imposition of trade tariffs on China,” factors that may temper the dollar’s strength.

On Tuesday, President Donald J. Trump fired Mr. Tillerson as the secretary of state, which will be replaced by the incumbent Central Intelligence Agency Mike Pompeo as his replacement.

“We got along actually quite well, but we disagreed on things,” Mr. Trump told reporters outside the White House.

The dollar retreated following the announcement, over fears that the move may sow further turmoil in the already tumultuous Trump administration. It was also stung by inflation data that matched low expectations, affirming the possibility of only three Fed rate hikes for the year.

Meanwhile, Mr. Trump is also seeking to slap China tariffs on up to $60 billion of imports, hitting directly the technology and the telecommunication sectors.

On the other hand, another trader said the pair only moved sideways today.

“The dollar-peso trading was fairly quiet today, but during the afternoon session, we had saw some buying… there were client flow somewhere,” a trader said over the phone yesterday.

For today, the first trader sees the peso moving between P51.90 and P52.20, while another trader gave a slimmer range of P51.95 to P52.15.

“The local currency is expected to depreciate further ahead of March US initial jobless claims data release [today] which is seen as a leading indicator of unemployment data,” the first trader noted.

Meanwhile, the South Korean won led gains as most Asian currencies rose against the dollar on Wednesday, with the Mr. Tillerson, coupled with inflation data, pulling the carpet out from under the greenback. — K.A.N. Vidal with Reuters