The peso rebounded against the dollar on Tuesday after the greenback fell to a two-month low amid comments from US Federal Reserve officials and ahead of the release of June US consumer inflation data.
The local currency closed at PHP 55.25 versus the dollar on Tuesday, strengthening by 44 centavos from Monday’s PHP 55.69 finish, data from the Bankers Association of the Philippines’ website showed.
The local unit opened Tuesday’s session at PHP 55.58 per dollar. Its weakest showing was at PHP 55.63, while its intraday best was at PHP 55.23 against the greenback.
Dollars traded jumped to USD 1.26 billion on Tuesday from the USD 748.65 million seen on Monday.
The peso rose after the dollar declined to a two-month low, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The dollar weakened to a two-month low on Tuesday after Federal Reserve officials signaled that the central bank was nearing the end of its tightening cycle, while the pound hit a 15-month high after pay growth exceeded expectations, Reuters reported.
Several Fed officials said on Monday the central bank would likely need to raise interest rates further to bring down inflation but the end to its current monetary policy tightening cycle was getting close.
The comments knocked the greenback to a two-month low of 101.67 against a basket of currencies, as traders pared back their expectations about how much further US rates may have to rise.
US interest rate expectations have been a key driver of the dollar since the Fed began its tightening cycle last year.
Markets are now focusing their attention on US consumer prices data due out on Wednesday, which will provide more clarity on the progress the Fed has made in its fight against stubbornly high inflation.
The Fed last month paused its tightening cycle after hiking its target interest rate by a cumulative 500 basis points to a range between 5% and 5.25%.
“The peso appreciated from profit taking amid expectations of a softer US consumer inflation report this week,” a trader said in an e-mail.
The US consumer price index (CPI) is widely expected by markets to ease to 3% in June from 4% in May, moving closer to the Fed’s 2% target, Mr. Ricafort said.
The US CPI rose by 0.1% in May after increasing 0.4% in April. In the 12 months through May, the CPI climbed 4%.
For Wednesday, the trader said the peso could strengthen further on the US consumer inflation report.
The trader sees the peso moving between PHP 55.10 and PHP 55.35 on Wednesday, while Mr. Ricafort sees it ranging from PHP 55.15 to PHP 55.35 per dollar. — AMCS with Reuters
This article originally appeared on bworldonline.com