Peso plunges to P57 level on US CPI
THE PESO plunged back to the P57-per-dollar level on Wednesday as faster-than-expected US consumer inflation data for June dampened bets of further rate cuts by the US Federal Reserve.
The local unit closed at P57.085 per dollar, sinking by 35.5 centavos from its P56.73 finish on Tuesday, Bankers Association of the Philippines data showed. This was a fresh three-week low for the peso as this was its lowest close since it ended at P57.16 on June 24.
The peso traded weaker than Tuesday’s close the entire session as it opened lower at P56.85, which was already its intraday best. Its worst showing was at P57.095 against the greenback.
Dollars exchanged rose to $1.58 billion on Wednesday from $1.28 billion on Tuesday.
“The dollar-peso continued its upward trend due to higher US inflation released overnight,” a trader said in a phone interview.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message the hotter-than-expected US CPI data for June reduced expectations of rate cuts by the US central bank this year.
For Thursday, the trader expects the peso to move between P56.80 and P57.30 per dollar, while Mr. Ricafort sees it ranging from P56.95 to P57.15.
US consumer prices increased by the most in five months in June amid higher costs for some goods, suggesting tariffs were starting to have an impact on inflation and potentially keeping the Federal Reserve on the sidelines until September, Reuters reported.
The consumer price index (CPI) increased 0.3% last month after edging up 0.1% in May, the Labor Department’s Bureau of Labor Statistics said on Tuesday. That gain was the largest since January, and also reflected higher rental costs.
In the 12 months through June, the CPI advanced 2.7% after rising 2.4% in May. Economists polled by Reuters had forecast the CPI would climb 0.3% and rise 2.6% on a year-over-year basis.
Economists generally expect the tariff-induced rise in inflation to become more evident in the July and August CPI reports, arguing that businesses were still selling merchandise accumulated before President Donald J. Trump announced sweeping import duties in April.
Mr. Trump last week announced higher duties would come into effect on Aug. 1 for imports from a range of countries, including Mexico, Japan, Canada and Brazil, and the European Union.
The US central bank tracks personal consumption expenditures (PCE) price index data for its 2% target. The Fed is expected to leave its benchmark overnight interest rate in the 4.25%-4.5% range at a policy meeting later this month. Minutes of the central bank’s June 17-18 meeting, which were published last week, showed only “a couple” of officials said they felt rates could fall as soon as the July 29-30 meeting.
CPI inflation readings came in on the low side in February through May, leading to demands by Mr. Trump for the Fed to lower borrowing costs. Mr. Trump persisted on Tuesday, writing on his Truth Social media platform, “Consumer Prices LOW. Bring down the Fed Rate, NOW!!”
Stocks on Wall Street were mixed. The dollar rose against a basket of currencies, hitting a 15-week high versus the Japanese yen. US Treasury yields rose. — AMCS with Reuters
