Peso gains on US consumer inflation data

Peso gains on US consumer inflation data
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THE PESO rose against the dollar on Thursday following the release of May US consumer price index (CPI) data overnight.

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The local unit closed at P58.58 per dollar on Thursday, strengthening by 10 centavos from its P58.68 finish on Tuesday, Bankers Association of the Philippines data showed.

The peso opened Thursday’s session stronger at P58.48 against the dollar. Its weakest showing was at P58.69, while its intraday best was at P58.47 versus the greenback.

Dollars exchanged increased to $1.32 billion on Thursday from $1.05 billion on Tuesday.

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The market was closed on Wednesday for the Independence Day holiday.

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The peso rose against the dollar after the US inflation report for May was unchanged, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“There was strengthening of most Asian currencies, including the Philippine peso, as the dollar softened due to the milder-than-expected US inflation data,” Security Bank Corp. Chief Economist Robert Dan J. Roces likewise said in a Viber message.

“Furthermore, the Federal Reserve’s indication of maintaining higher interest rates for an extended period and postponing the initiation of cuts to December has contributed to this trend,” he added.

The dollar edged up on Thursday, recovering some of the previous day’s losses after the Federal Reserve forecast just one rate cut this year, although softer-than-expected US inflation tempered some of those gains, Reuters reported.

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Price action in the currency market was relatively subdued on Thursday, compared with the previous day, when the dollar fell almost 1% at one point in the immediate wake of the release of the CPI data, before ending the day with a 0.5% loss — still its largest in two weeks.

US consumer prices were unchanged in May from April, against market expectations of a 0.1% rise.

Inflation rose at an annual rate of 3.4%, still well above the Fed’s target of 2%.

Later on Wednesday, the Federal Reserve left the funds rate on hold at 5.25-5.5% and policy makers’ median projection for the number of cuts this year fell to just one, from three in March.

Despite the Fed’s projections, markets stuck with pricing in almost two 25-basis-point rate cuts this year, which helped reverse some of the losses in the dollar.

US Fed Chair Jerome H. Powell struck a familiar tone in his news conference and stressed policy makers would be sensitive to economic data. Although less cuts were projected for this year, policy makers had them penciled for 2025 or 2026.

For Friday, Mr. Ricafort sees the peso moving between P58.45 and P58.65 per dollar. — AMCS with Reuters

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