Peso nears record low as inflation picks up

THE PESO weakened to a fresh one-month trough against the dollar on Tuesday to close just a shade higher than its record low as December inflation was faster than expected and as geopolitical concerns continued to weigh on sentiment.

The local unit closed at P59.21 versus the greenback, sliding by eight centavos from its P59.13 finish on Monday, data from the Bankers Association of the Philippines data showed.

This was its worst finish in nearly a month or since its record-low close of P59.22 on Dec. 9.

The peso opened Tuesday’s trading session stronger at P59.07 versus the dollar, which was also its intraday best. Its weakest showing was its close of P59.21 against the greenback.

Dollars traded increased to $1.386 billion from $929 million on Monday.

The peso dropped due to quicker-than-expected December inflation, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Headline inflation picked up to 1.8% last month from 1.5% in November, but slowed from 2.9% in December 2024. This was within the Bangko Sentral ng Pilipinas’ (BSP) 1.2-2% forecast for the month, but was above the 1.4% median estimate in a BusinessWorld poll of 14 analysts.

“The dollar-peso traded higher on demand for safe-haven assets amid rising geopolitical tensions,” a trader said in a phone interview.

The US dollar ticked lower for a second day against major peers on Tuesday, as market jitters from US military action in Venezuela eased and stocks rallied around the world, helped by dovish comments from Federal Reserve officials, Reuters reported.

The impact of the shock US capture of Venezuelan President Nicolas Maduro over the weekend was short-lived across most asset classes with stocks around the world trading at record highs.

That also had ripple effects in currency markets.

The dollar index, which measures its strength against a basket of six currencies, was last trading at 98.25, down 0.1% and extending losses after snapping a four-day winning streak on Monday.

For Wednesday, the trader sees the peso moving between P59 and P59.30 per dollar, while Mr. Ricafort sees it ranging from P59.10 to P59.30. — A.M.C. Sy with Reuters