THE PESO inched up against the dollar on Tuesday after inflation eased further in May.
The local currency closed at P56.22 versus the dollar on Tuesday, rising by two centavos from Monday’s P56.24 finish, data from the Bankers Association of the Philippines’ website showed.
The local unit opened Tuesday’s session at P56.19 per dollar. Its weakest showing was at P56.27, while its intraday best was at P56.15 against the greenback.
Dollars traded dropped to $917.45 million on Tuesday from the $1.078 billion recorded on Monday.
The peso was supported by data showing that inflation slowed to a one-year low last month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The peso appreciated from local optimism after domestic inflation continued to decline in May 2023 at 6.1%, matching market expectations,” a trader likewise said in an e-mail.
May headline inflation slowed from the 6.6% print in April but was faster than the 5.4% in the same month a year ago.
This was also the 14th straight month that the consumer price index (CPI) was above the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target for the year.
The May print matched the 6.1% median estimate in a BusinessWorld poll last week and was within the central bank’s 5.8-6.6% estimate for the month.
For the first five months, the CPI averaged 7.5%, still above the BSP’s 5.5% forecast for the year.
Mr. Ricafort added that the peso appreciated amid expectations of steady borrowing costs from both the US Federal Reserve and the BSP.
The US central bank raised borrowing costs by 25 basis points (bps) at its May 2-3 meeting, bringing its target interest rate to 5% to 5.25%.
The Fed has hiked rates by 500 bps since March 2022.
It will hold a policy meeting on June 13-14.
Meanwhile, the BSP on May 18 kept its policy rate unchanged at 6.25% for the first time after nine meetings.
Since it began its aggressive monetary tightening cycle in May 2022, the central bank had raised borrowing costs by 425 bps.
Its next review is on June 22.
For Wednesday, the trader said the peso could appreciate further due to potentially hawkish statements from European Central Bank officials.
The trader sees the peso moving between P56.10 and P56.35 versus the dollar on Wednesday, while Mr. Riocafort expects it to trade from P56.12 to P56.32. — AMCS