Peso rises as Fed seen done with hikes

THE PESO appreciated against the dollar on Wednesday due to expectations that the US Federal Reserve will pause at its next meeting after lower-than-expected US consumer inflation last month.

The local unit closed at PHP 55.825 per dollar on Wednesday, strengthening by 23.5 centavos from its PHP 56.06 finish on Tuesday, based on Bankers Association of the Philippines data.

This was the peso’s best close in more than three months or since its PHP 55.74-per-dollar finish on Aug. 4.

The peso opened Wednesday’s session at PHP 55.78 against the dollar. Its intraday best was at PHP 55.70, while its weakest showing was at PHP 55.865 versus the greenback.

Dollars exchanged rose to USD 1.48 billion on Wednesday from USD 1.43 billion on Tuesday.

The peso rose against the dollar on Wednesday due to expectations of a pause by the Fed in their next meeting as US consumer inflation was slower than expected in October, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The better US consumer price index (CPI) report for October could also support a rate cut in 2024 by the Fed, Mr. Ricafort said.

US consumer prices were unchanged in October as Americans paid less for gasoline, and the annual rise in underlying inflation was the smallest in two years, bolstering the view that the Federal Reserve was probably done raising interest rates, Reuters reported.

Combined with data this month showing job and wage growth cooling in October, the data reinforced expectations the economy could avoid a dreaded recession.

The unchanged reading in the consumer price index, the first in more than a year, followed a 0.4% rise in September.

In the 12 months through October, the CPI climbed 3.2% after rising 3.7% in September.

Economists polled by Reuters had forecast the CPI would gain 0.1% on the month and increase 3.3% on a year-on-year basis.

The US central bank kept its benchmark interest rate steady at the 5.25%-5.5% range for a second straight time during its Oct. 31-Nov. 1 meeting.

It has hiked rates by a cumulative 525 basis points since it began its tightening cycle in March last year.

The Federal Open Market Committee will next meet on Dec. 12-13 to review policy.

The peso was also supported by a generally weaker dollar and lower US Treasury yields, Mr. Ricafort added.

The dollar index, which measures the currency against a basket of peers, last stood at 104.14, not far from Tuesday’s two-month low of 103.98, Reuters reported.

For Thursday, Mr. Ricafort sees the peso ranging from PHP 55.75 to PHP 55.95 per dollar. — AMCS with Reuters