The peso returned to the PHP 57 level against the dollar on Tuesday after the central bank said it would keep benchmark rates elevated as upside risks to inflation remain.
The local unit closed at PHP 57.97 per dollar on Tuesday, strengthening by 14 centavos from its PHP 58.11 finish on Monday, Bankers Association of the Philippines data showed.
This was the peso’s first time to return to the PHP 57 level in over a week or since May 20’s PHP 57.90 finish.
The peso opened Tuesday’s session slightly stronger at PHP 58.07 against the dollar, which was also its weakest showing. Its intraday best was at PHP 57.90 versus the greenback.
Dollars exchanged rose to USD 1.24 billion on Tuesday from USD 791.5 million on Monday.
“The peso recovered after local economic managers signaled at keeping domestic monetary policy restrictive in the near term,” a trader said in an e-mail.
Bangko Sentral ng Pilipinas (BSP) Senior Assistant Governor Iluminada T. Sicat said on Monday that the central bank will keep monetary policy settings “restrictive” and be careful not to bring down interest rates too early to anchor inflation expectations and prevent further second-round effects.
The Monetary Board this month kept its policy rate at a 17-year high of 6.5% for a fifth straight meeting following hikes worth 450 basis points from May 2022 to October 2023 to help bring down elevated inflation.
The dollar’s continued weakness also supported the peso, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The dollar edged down on Tuesday, but remained in tight ranges against peers, ahead of key inflation data from major economies this week that could inform the global interest rate outlook, Reuters reported.
The greenback was also on the verge of its first monthly decline in 2024.
Markets are currently more than fully priced for a US rate cut in December. They also discount an 80% chance of such a move in November and a 60% chance in September.
Against a basket of currencies, the dollar was down 0.11% to 104.44, for a 1.7% decline on a monthly basis.
For Wednesday, the trader said the peso could strengthen further ahead of the US personal consumption expenditures price index report to be released on Friday.
The trader sees the peso moving between PHP 57.85 and PHP 58.10 on Wednesday, while Mr. Ricafort expects the peso to range from PHP 57.85 to PHP 58.05 per dollar. — A.M.C. Sy with Reuters
This article originally appeared on bworldonline.com