THE PESO posted a fresh six-month high against the dollar on Monday as easing US inflation in December 2022 fanned hopes of smaller rate hikes from the US Federal Reserve as early as this month.

The local currency closed at P54.575 versus the greenback on Monday, climbing by 31.50 centavos from Friday’s P54.89 finish, data from the Bankers Association of the Philippines showed.

This is the peso’s best close since it finished at P54.47 on June 22, 2022.

The peso opened Monday’s trading session at P54.90 per dollar, which was already its weakest showing for the day. Its intraday best was at P54.475 against the greenback.

Dollars traded went down to $1.27 billion from $1.37 billion on Friday.

A trader said in an e-mail that the peso strengthened on expectations that the Fed would hike rates by just 25 basis points (bps) in its first policy meeting for the year to be held on Jan. 31 to Feb. 1.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message that the peso was supported by latest US consumer inflation data that bolstered hopes of slower tightening by the Fed,

The US central last month hiked its federal funds rate by just 50 bps to a 4.25%-4.5% range following four straight 75-bp increases. This brought cumulative hikes for 2022 to 425 bps.

The US consumer price index (CPI) slipped by 0.1% last month, the first decline since May 2020 and coming from a 0.1% rise in November.

On an annual basis, the CPI increased 6.5%, easing from the 7.1% print seen in November 2022.

The dollar is already at its lowest since May at 127.22 yen, having shed 3.2% last week, and threatens to break major support around 126.37, Reuters reported.

The euro also lost 1.5% on the yen last week, but was aided by gains on a broadly softer dollar, which saw it reach a fresh nine-month peak of $1.0872 on Monday.

All of which saw the US dollar index ease to its lowest since June at 101.780.

For Tuesday, the trader said the peso could weaken against the dollar on expectations of weak Chinese gross domestic product (GDP) data that could fuel recession fears.

The trader sees the peso moving between P54.45 and P54.70 versus the greenback on Tuesday, while Mr. Ricafort gave a forecast range of P54.45 to P54.65. — AMCS with Reuters