THE PESO strengthened against the dollar on Wednesday as US consumer inflation eased in February, supporting expectations of a smaller hike from the US Federal Reserve next week.
The local currency closed at PHP 54.95 versus the dollar on Wednesday, appreciating by 13 centavos from Tuesday’s PHP 55.08 finish, data from the Bankers Association of the Philippines’ website showed.
The peso opened Wednesday’s session stronger at PHP 54.90 per dollar. Its intraday best was at P54.75, while its worst showing was at PHP 54.977 against the greenback.
Dollars traded declined to USD 899.7 million on Wednesday from the USD 1.128 billion recorded on Tuesday.
“The peso appreciated after US headline consumer inflation continued to decline at 6% and matched market expectations,” a trader said in an e-mail.
The US consumer price index (CPI) rose 0.4% last month after climbing by 0.5% in January.
In the 12 months through February, the CPI increased 6%, easing slightly from 6.4% in January.
The peso was supported by the steady weakness of the dollar on expectations of a dovish Fed, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The greenback held steady on Wednesday, with the dollar index, which measures the US currency against six rivals, at 103.69.
This, as inflation data and issues surrounding the US banking sector reinforced hopes that the Fed will likely go for a smaller rate hike when it meets on March 21-22.
The Fed hiked its target interest rate by 25 basis points (bps) at its Jan. 31 to Feb. 1 meeting to a range between 4.5% and 4.75%.
The US central bank has now raised rates by a total of 450 bps since March 2022.
Mr. Ricafort added that the increase in remittances improved sentiment.
Cash remittances coursed through banks rose 3.5% to USD 2.76 billion in January from USD 2.67 billion in the year prior, data from the Bangko Sentral ng Pilipinas showed.
For Thursday, the trader said the peso could continue to strengthen against the dollar as US producer inflation is expected to have declined last month.
The trader sees the peso moving from PHP 54.80 to PHP 55.05 per dollar on Thursday, while Mr. Ricafort expects it to trade between PHP 54.85 and PHP 55.05. — A.M.C. Sy
This article originally appeared on bworldonline.com