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US inflation easing lifts Philippine peso

The Philippine peso ended the week on a strong note against the US dollar, hitting a six-and-a-half-month high, as the easing of US inflation could trigger a less hawkish Federal Reserve, which would reduce the greenback’s allure.

The local currency gained 40 centavos to close at P54.89:$1 from Thursday’s finish of P55.29:$1.

This is the strongest for the peso in over six months, when it closed at P54.77:$1 on June 28, 2022.

In a commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that the local unit’s strong performance against its US counterpart was largely brought about by the renewed decline in the dollar against major global currencies, which was triggered by US inflation reaching a new 14-year low of 6.5% in December 2022.

Ricafort said this could support "smaller future Fed rate hikes of about +0.25 as signaled recently by some Fed officials and by the markets."

"The US CPI/inflation data is one of the most important economic data being monitored…. any further easing in the US CPI/inflation data would lead to reduced need for further Fed rate hikes/monetary tightening for the coming months, at the very least," he said.

Since the start of 2023, the peso has appreciated by 86.5 centavos since it closed at P55.755:$1 on December 31, 2022. —VBL, GMA Integrated News