Peso climbs vs dollar on slower US CPI in July, stock index’s rise

THE PESO rebounded versus the greenback on Thursday on slower-than-expected US inflation and as the local stock market posted gains.

The local unit closed at P55.30 per dollar on Thursday, appreciating by 36.5 centavos from its P55.665 finish on Wednesday, data from the Bankers Association of the Philippines showed.

The peso opened Thursday’s session at P55.45 versus the dollar. Its weakest showing was at P55.58, while its intraday best was its close of P55.30 versus the greenback.

The peso appreciated following the release of US inflation data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The dollar index fell by 1.0% yesterday as a cooler US CPI print led markets to pare back expectations of policy tightening by the Fed at the 20-21 September meeting,” MUFG Bank analyst Sophia Ng said in a research note.

“As a result, the Fed funds futures market is now pricing in a higher probability of a 50-basis-point (bp) hike in September rather than 75 bps and US equity markets rallied,” she added. “However, a softer inflation print does not necessarily mean a 75 bps is off the table as inflation remains elevated and well above the Fed’s 2% inflation target.”

Consumer prices in the United States decelerated last month as gasoline prices dropped sharply, raising market sentiment that the US Federal Reserve may dial back its aggressive interest rate hikes.

The US consumer price index (CPI) climbed 8.5% year on year in July, slower than the 9.1% rise in June.

The Fed has raised its key rates by 225 bps since March in a bid to keep rising prices under control.

The local currency was also stronger after the local stock market posted hefty gains on Thursday, Mr. Ricafort said.

The Philippine Stock Exchange index gained 208.84 points or 3.23% to close at 6,680.68, while the wider all shares index increased by 89.06 points or 2.57% to 3,550.57.

“The peso and local stock market also gained after continued better corporate earnings or results such as for Jollibee, Shell, among others, that could help fundamentally boost valuations,” Mr. Ricafort said.

“M&A activities between ABS-CBN and PLDT/TV5 Group also boosted local stock market confidence lately,” he added.

Under the deal signed on Thursday, ABS-CBN will acquire 6,459,353 primary shares, or roughly 34.99%, in TV5 for P2.16 billion. There is also an option for ABS-CBN to increase its stake to up to 49.92%.

The deal also includes Cignal Cable acquiring a minority 38.88% stake in SkyCable for P2.862 billion.

For Friday, Mr. Ricafort expects the peso to move between P55.20 to P55.40 per dollar.

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