Philippine Peso Ends Losing Streak on Inflation Report

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Philippine Peso Ends Losing Streak on Inflation ReportThe Philippine peso ended its losing streak after data showed that inflation in May rose at the strongest pace since 2011, spurring bets that the central bank will move in to hike interest rates.

The peso accelerated 0.2 percent to trade at 43.81 per dollar, reversing its earlier 0.1 percent loss. The currency has gained 1.3 percent since January.

The Manila-based statistics office reported that consumer prices grew 4.5 percent in May from a year earlier. This compares to a 4.1 percent advance in April and an estimate of 4.2 percent in a Bloomberg News poll of economists.

“The Philippine peso is being supported by the hawkish remarks,” Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong emailed Bloomberg. “Odds of a rate hike on June 19 now seem higher, although the central bank may wait one month longer given recent growth slowdown.”

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The central bank of Philippines, which convenes on June 19, has maintained the overnight interest rate at 3.5 percent since October 2012 in a bid to boost growth despite inflation rate hovering way above the target rate since last December. It also increased the banks’ reserve requirements two times this year.

Philippine economic expansion in the first quarter stood under 6 percent for the first time in 27 months, according to data released last week. The gross domestic product grew 5.7 percent from a year ago, which was less than 6.4 percent expected by analysts surveyed by Bloomberg News.

The peso’s one-month implied volatility, which measures the expected shifts in the exchange rate used to assign value to options, rose 0.03 percentage point, or three basis points, to stand at 4.98 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com