THE PHILIPPINE PESO strengthened against the dollar on Wednesday after inflation in the US continued to cool, and as investors waited for the results of the US Federal Reserve’s policy meeting.
It closed at P55.94, inching up by a centavo from Tuesday’s P55.95 finish, data from the Bankers Association of the Philippines website showed.
The peso opened at P55.88 a dollar, which was also its intraday best. It weakened to as much as P56.015. Dollars traded rose to $881.9 million from $834.75 million a day earlier.
The peso was supported by the release of the US Bureau of Labor Statistics’ inflation report, as well as expectations that the Fed would pause its tightening cycle, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.
“The peso appreciated slightly following the weaker-than-expected US consumer inflation report for May 2023,” another trader said in a Viber message.
US consumer prices barely rose in May and the annual increase in inflation was the smallest in more than two years, though underlying price pressures remained strong, supporting the view that the US Federal Reserve would keep interest rates unchanged on Wednesday while adopting a hawkish posture, Reuters reported.
Consumer prices in the US rose by 4% in May, the slowest in more than two years, easing from April’s 4.9%.
The US central bank raised borrowing costs by 25 basis points (bps) last month, bringing the Fed fund rate to 5-5.25%. It has increased borrowing costs by 500 bps since March 2022.
Mr. Ricafort said a weaker dollar recently had also boosted the peso.
The dollar hovered near a three-week low against the euro and a one-month low versus the sterling on Wednesday.
The dollar index, which measures the currency against six major peers including the euro and sterling, was flat at 103.30 in Asian trading, after dipping to the lowest since May 22 overnight at 103.04.
The trader expects the peso to weaken on Thursday due to caution ahead of the Federal Reserve policy decision.
The trader expected the peso to trade from P55.85 to P56.05 a dollar, while Mr. Ricafort expected it to move between P55.85 and P55.95. — AMCS