Peso plunges to PHP 57 level on US CPI

The peso plunged back to the PHP 57-per-dollar level on Wednesday as faster-than-expected US consumer inflation data for June dampened bets of further rate cuts by the US Federal Reserve.

The local unit closed at PHP 57.085 per dollar, sinking by 35.5 centavos from its PHP 56.73 finish on Tuesday, Bankers Association of the Philippines data showed. This was a fresh three-week low for the peso as this was its lowest close since it ended at PHP 57.16 on June 24.

The peso traded weaker than Tuesday’s close the entire session as it opened lower at PHP 56.85, which was already its intraday best. Its worst showing was at PHP 57.095 against the greenback.

Dollars exchanged rose to USD 1.58 billion on Wednesday from USD 1.28 billion on Tuesday.

“The dollar-peso continued its upward trend due to higher US inflation released overnight,” a trader said in a phone interview.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message the hotter-than-expected US CPI data for June reduced expectations of rate cuts by the US central bank this year.

For Thursday, the trader expects the peso to move between PHP 56.80 and PHP 57.30 per dollar, while Mr. Ricafort sees it ranging from PHP 56.95 to PHP 57.15.

US consumer prices increased by the most in five months in June amid higher costs for some goods, suggesting tariffs were starting to have an impact on inflation and potentially keeping the Federal Reserve on the sidelines until September, Reuters reported.

The consumer price index (CPI) increased 0.3% last month after edging up 0.1% in May, the Labor Department’s Bureau of Labor Statistics said on Tuesday. That gain was the largest since January, and also reflected higher rental costs.

In the 12 months through June, the CPI advanced 2.7% after rising 2.4% in May. Economists polled by Reuters had forecast the CPI would climb 0.3% and rise 2.6% on a year-over-year basis.

Economists generally expect the tariff-induced rise in inflation to become more evident in the July and August CPI reports, arguing that businesses were still selling merchandise accumulated before President Donald J. Trump announced sweeping import duties in April.

Mr. Trump last week announced higher duties would come into effect on Aug. 1 for imports from a range of countries, including Mexico, Japan, Canada and Brazil, and the European Union.

The US central bank tracks personal consumption expenditures (PCE) price index data for its 2% target. The Fed is expected to leave its benchmark overnight interest rate in the 4.25%-4.5% range at a policy meeting later this month. Minutes of the central bank’s June 17-18 meeting, which were published last week, showed only “a couple” of officials said they felt rates could fall as soon as the July 29-30 meeting.

CPI inflation readings came in on the low side in February through May, leading to demands by Mr. Trump for the Fed to lower borrowing costs. Mr. Trump persisted on Tuesday, writing on his Truth Social media platform, “Consumer Prices LOW. Bring down the Fed Rate, NOW!!”

Stocks on Wall Street were mixed. The dollar rose against a basket of currencies, hitting a 15-week high versus the Japanese yen. US Treasury yields rose. — AMCS with Reuters