Peso rises further on US CPI data

THE PESO strengthened against the dollar on Thursday as US consumer inflation eased last month, renewing bets of an early rate cut by the US Federal Reserve.

The local unit closed at P57.465 per dollar on Thursday, strengthening by four centavos from its P57.505 finish on Wednesday, Bankers Association of the Philippines data showed.

The peso opened Thursday’s session at P57.35 against the dollar. Its intraday best was at P57.24, while its weakest showing was at P57.48 versus the greenback.

Dollars exchanged rose to $1.76 billion on Thursday from $1.27 billion on Wednesday.

“The peso appreciated after US consumer inflation for April came in weaker than market expectations after three months of upside surprises,” a trader said in an e-mail.

This resulted in increased expectations of an earlier rate cut by the US Federal Reserve, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message

US consumer prices increased less than expected in April, suggesting that inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations for a September interest rate cut, Reuters reported.

The consumer price index (CPI) rose 0.3% last month after advancing 0.4% in March and February, the Labor department’s Bureau of Labor Statistics said.

In the 12 months through April, the CPI increased 3.4% after climbing 3.5% in March. Economists polled by Reuters had forecast the CPI gaining 0.4% on the month and 3.4% year-on-year.

Financial markets saw a roughly 73% probably of a rate cut in September, up from 69% before the data. A few economists anticipate the Fed will start lowering borrowing costs in July.

For Friday, the trader said the market would digest comments from Bangko Sentral ng Pilipinas Governor Eli M. Remolona, Jr. that rate cuts could start by the third or fourth quarter amid easing upside risks to inflation.

The trader sees the peso moving between P57.30 and P57.55 per dollar on Friday, while Mr. Ricafort expects it to range from P57.35 to P57.55. — A.M.C. Sy with Reuters