Peso drops to P55:$1; PSEi falls below 6,900

THE peso fell back to the P55:$1 level, and the stock market also dropped below 6,900 after higher-than-expected January inflation spooked traders.

The currency weakened by 69-and-a-half centavos to close at P55.085 vs the dollar while the benchmark Philippine Stock Exchange index (PSEi) lost 55.35 points, or 0.80 percent, to end the day at 6,881.26.

The broader All Shares shed 18.93 points, or 0.52 percent, to settle at 3,665.75.

Markets were said to have been spooked after January inflation accelerated to 8.7 percent, raising the possibility that the Bangko Sentral ng Pilipinas (BSP) would remain aggressive in its monetary tightening.

“For January, the Philippines’ inflation rate… [was] faster than December’s 8.1 percent and higher than the forecast range of the BSP at 7.5 percent to 8.3 percent,” Claire Alviar, research associate at Philstocks Financial Inc., said.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., added that inflation “was higher than market estimates and is the highest since November 2008 when it posted 9.1 percent.”

The consensus among analysts was that consumer price growth would have slowed to 7.6 percent last month.

“CPI (consumer price index) went high due to higher prices of electricity, rental, water and other utilities, as well as the continued increase in the prices of agricultural products and other food items,” Ricafort added.

Constant storm damage, from late October’s severe tropical storm to a shear line that hit parts of the country from December to January 2023, led to upticks in prices in a number of major agricultural areas, he continued.

The BSP’s policymaking Monetary Board will meet next week to discuss interest rates. On Saturday, central bank Governor Felipe Medalla said they would focus on “inflationary expectations.”

Regina Capital Development Corp. Managing Director Luis Limlingan, meanwhile, said investors would also be waiting for the latest commentary due Tuesday (Wednesday, Manila time) from US Federal Reserve Chairman Jerome Powell.

“Markets interpreted a slew of his disinflation comments during last week’s post-meeting press conference as dovish and stocks rallied,” Limlingan said.

“Many view the [Tuesday] appearance as an opportunity for Powell to offer more clarity on where rates are headed, or clarify some comments made after last week’s 25-basis-point rate adjustment,” he added.

The peso opened at P54.65:$1 and traded between P54.6 and P55.1. Volume reached $1.274 trillion, higher than the previous day’s $1.053 trillion.

At the stock market, all sectoral indices except holding firms, and mining and oil (up 0.10 percent and 0.52 percent, respectively), closed in the red. Services fell the most by 1.53 percent.

Just under 1.03 billion shares worth P6.14 billion changed hands.

Decliners slightly edged out advancers, 97 to 88, while 51 remained unchanged.