THE PESO recovered against the dollar on Wednesday on expectations that the US Congress will approve the agreement reached by US President Joseph R. Biden, Jr. and House Speaker Kevin McCarthy to lift the $31.4-trillion US debt ceiling and expectations of slower inflation in May.

The local currency closed at P56.15 versus the dollar on Wednesday, strengthening by 16 centavos from Tuesday’s P56.31 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Wednesday’s session at P56.30 per dollar. Its intraday best was at P56.10, while its worst showing for the day was at P56.34 against the greenback.

Dollars traded fell to $1.065 billion on Wednesday from the $1.394 billion recorded on Tuesday.

“The peso appreciated amid expectations that the US Congress will approve the US debt ceiling agreement made by US President Biden and Speaker McCarthy,” a trader said in an e-mail.

Legislation brokered by Mr. Biden and Mr. McCarthy to lift the $31.4-trillion US debt ceiling and achieve new federal spending cuts passed an important hurdle late on Tuesday, advancing to the full House of Representatives for debate and an expected vote on passage on Wednesday, Reuters reported.

The House Rules Committee voted 7-6 to approve the rules allowing debate by the full chamber. Two committee Republicans, Representatives Chip Roy and Ralph Norman, bucked their leadership by opposing the bill.

That vote underscored the need for Democrats to help pass the measure in the House, which is controlled by Republicans with a narrow 222-213 majority.

House passage would send the bill to the Senate. The measure needs congressional approval before June 5, when the Treasury department could run out of funds to pay its debts for the first time in US history.

The peso was also supported by expectations of slower headline inflation last month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted in a Viber message.

The Bangko Sentral ng Pilipinas (BSP) on Wednesday said headline inflation likely settled within 5.8% to 6.6% in May amid lower pump prices.

If realized, inflation would exceed the BSP’s 2-4% target for the 14th consecutive month.

Still, the lower end of the forecast or 5.8% would be the slowest pace recorded in a year or since the 5.4% recorded in May 2022. The higher end would match the 6.6% headline print recorded in April.

The BSP sees inflation averaging 5.5% this year. For the first four months, the consumer price index averaged 7.9%.

The Philippine Statistics Authority will release May inflation data on June 6

For Thursday, the trader said the peso could strengthen on a potentially weaker US initial jobless claims report.

The trader sees the peso moving between P56 and P56.25 per dollar, while Mr. Ricafort sees trading from P56.05 to P56.25. — A.M.C. Sy with Reuters