THE PESO strengthened against the dollar on Wednesday on expectations of a hawkish stance from the central bank as inflation may have exceeded 9% last month.

The local currency closed at P54.98 versus the greenback on Wednesday, rising by 35 centavos from Tuesday’s P55.33 finish, Bankers Association of the Philippines data showed.

The peso opened Wednesday’s trading session at P55.30 per dollar, which was also its worst showing for the day. Its intraday best was at P54.97 against the greenback.

Dollars traded went down to $1.03 billion on Wednesday from $1.204 billion on Tuesday.

“The peso appreciated from hawkish policy views after the BSP (Bangko Sentral ng Pilipinas) projected the February local inflation at a higher range of 8.5-9.3% from January,” a trader said in an e-mail.

The peso rose “after the recent signals from local monetary authorities that they are ready to use tools available in the policy toolkit to help stabilize inflation,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

BSP Senior Assistant Governor Iluminada T. Sicat on Tuesday said February inflation is “still elevated” and the central bank will “make use of all available tools in order to stabilize and bring back inflation trend back to the target range.”

Headline inflation may have breached 9% last month due to higher prices of cooking gas, pork, fish, and eggs, the central bank said on Tuesday.

The BSP said February inflation likely settled within the 8.5% to 9.3% range in February. This would follow January’s 8.7% print, which was the quickest since November 2008.

If realized, February would mark the 11th straight month that inflation would exceed the BSP’s 2-4% target range.

The upper end of the forecast or 9.3% would be the fastest pace recorded in more than 14 years or since the 9.7% recorded in October 2008.   

The BSP raised borrowing costs by 50 basis points (bps) at its Feb. 16 meeting, bringing the key rate to 6%, the highest in nearly 16 years.

It has now hiked benchmark rates by 400 bps since May 2022.

For Thursday, the trader said the peso could weaken anew due to potentially strong US manufacturing data.

The trader sees the peso moving from P54.90 to P55.05 a dollar on Thursday, while Mr. Ricafort expects it to trade between P54.90 and P55.10. — AMCS