THE PESO appreciated against the dollar on Monday on expectations of easing inflation and bets that the US Federal Reserve would keep rates steady following positive data last week.

The local currency closed at P54.88 versus the dollar on Monday, inching up by three centavos from Friday’s P54.91 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Monday’s session at P54.888 per dollar. Its weakest showing of the day was at P54.91, while its intraday best was at P54.75 against the greenback.

Dollars traded dropped to $1.03 billion on Monday from the $1.1 billion seen on Friday.

The peso strengthened on expectations that Philippine inflation eased in July, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

A BusinessWorld poll of 17 analysts yielded a median estimate of 4.9% for July headline inflation.

If realized, this would be below the 5.4% in June but would match the 4.9% seen in April last year. It would also match the upper end of the Bangko Sentral ng Pilipinas’ 4.1% to 4.9% forecast.

Still, this would be the 16th straight month that the consumer price index (CPI) exceeded the central bank’s annual 2-4% target.

The Philippine Statistics Authority will release July CPI data on Friday.

“The peso appreciated after the Federal Reserve’s preferred inflation gauge came in slightly weaker than market expectations at 3%, bolstering views of no further US rate hikes for the year,” a trader said in an e-mail.

Annual US inflation rose at its slowest pace in more than two years in June, with underlying price pressures receding, a trend that, if sustained, could push the Federal Reserve closer to ending its fastest interest rate hiking cycle since the 1980s, Reuters reported.

The personal consumption expenditures (PCE) price index increased 0.2% last month after edging up 0.1% in May, the Commerce department said. In the 12 months through June, the PCE price index advanced 3%. That was the smallest annual gain since March 2021 and followed a 3.8% rise in May.

The Fed hiked interest rates by 25 basis points (bps) last week, bringing its target rate to a range between 5.25% and 5.5%.

The US central bank has now raised rates by 525 bps since it began its tightening cycle in March last year.

For Tuesday, the trader said the peso could strengthen further against the dollar as the market awaits the July inflation report.

The trader sees the peso moving between P54.60 and P54.85 per dollar on Tuesday, while Mr. Ricafort sees it ranging from P54.80 to P55. — A.M.C. Sy with Reuters