THE PESO inched higher against the dollar on Monday after the Bangko Sentral ng Pilipinas (BSP) chief hinted at another rate increase next month.

The local unit closed at P52.31 per dollar on Monday, moving sideways from its P52.32 finish on Friday, based on data from the Bankers Association of the Philippines.

The peso opened Monday’s session at P52.20 versus the dollar. Its weakest showing was at P52.33, while its intraday best was at P52.16 against the greenback.

Dollars exchanged rose to $1.19 billion on Monday from $1.05 billion on Friday.

“The peso appreciated after the BSP hinted at a potentially stronger rate hike in its upcoming June policy meeting,” a trader said in an e-mail.

The BSP is likely to raise key interest rates by another 25 basis points (bps) at its next policy review on June 23, its chief said last week.

“We are probably inclined to have another 25-basis-point adjustment on our next Monetary Board meeting which is on June 23,” BSP Governor Benjamin E. Diokno said.

The BSP raised benchmark interest rates by 25 bps on May 19, marking its first hike since November 2018, as it tries to temper rising inflationary pressures.

The Monetary Board increased the key policy rate by 25 bps to 2.25%. Interest rates on the overnight deposit and lending facilities were also hiked by 25 bps to 1.75% and 2.75%, respectively.

At that meeting, the central bank upwardly revised its average inflation forecast for 2022 to 4.6% from the previous forecast of 4.3%, exceeding the 2-4% target band. For 2023, the BSP’s inflation forecast was hiked to 3.9% from 3.6% previously.

Inflation climbed to 4.9% in April, the highest in more than three years.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail that the peso rose slightly after the market factored in gains in the local stock market.

Stocks continued to improve on Monday amid Wall Street’s rebound amid easing economic concerns and with China loosening mobility restrictions.

The benchmark Philippine Stock Exchange index climbed by 96.18 points or 1.43% to close at 6,822.32 on Monday, while the broader all shares index went up by 36.94 points or 1.02% to 3,633.07.

Mr. Ricafort said lower US yields also reduced demand for the dollar.

The dollar was pinned near five-week lows on hopes of an eventual slowdown in US monetary tightening following sharp interest rate hikes in June and July, Reuters reported.

Investors have seized on hints that the US Federal Reserve, once it has hiked aggressively over the next two months, might then slow its tightening.

The chance of a less hawkish Fed was enough to see Treasuries rebound, with 10-year note yields above a six-week low at 2.743%. That is down from a peak of 3.203% on May 9.

“Peso also slightly stronger after Metro Manila and 62 other areas were placed at the lower at Alert Level 1 from June 1-15, 2022,” Mr. Ricafort added.

The trader said the peso might weaken anew against the dollar on Tuesday due to Federal Reserve Board Governor Christopher J. Waller’s speaking engagement overnight.

The trader and Mr. Ricafort both expect the peso to move within P52.20 to P52.40 versus the dollar on Tuesday. — KBT with Reuters