Peso weakens on bets favoring BSP policy rate cut

The Philippine peso depreciated against the US dollar on Friday as expectations of another interest rate cut amid a slower June inflation weakened the local unit.

The local currency shed 6.5 centavos to close at P51.195:$1 from 51.13 on Thursday.

“Lower-than-expected inflation rate of 2.7%, near two-year low, increases the odds of further easing of monetary policy through another cut in local policy rates,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said.

"Lower local interest rates tend to party weigh on the peso, at times," Ricafort said.

Inflation slowed to 2.7% in June from 3.2% in May. This is also the slowest print since September 2017 when it clocked in at 3.0%. 

The slower inflation is likely to be a “green light” for the Bangko Sentral ng Pilipinas to make another cut on its policy rate, London-based think tank Capital Economics said. 

Week-on-week, the local unit gained 4.5 centavos from P51.24:$ on June 28. The peso was weaker by P1.385 from 49.810 on Jan. 3, the first trading day of 2018. —VDS, GMA News