The bellwether index and local currency both rebounded on Friday, with the Philippine Stock Exchange Index (PSEi) closing at 5,938.38, up 26.45 points or 0.45 percent, while the peso strengthened sharply to P61.47 per US dollar as markets welcomed softer-than-expected inflation figures for May.

The Philippine Statistics Authority reported that inflation slowed to 6.8 percent in May, lower than April’s 7.2 percent and below the Bangko Sentral ng Pilipinas’ forecast range of 7.1 to 7.9 percent.

Indications that inflation may have peaked

The lower inflation reading improved the country’s macroeconomic outlook by easing pressure on consumers and businesses while reducing the likelihood of more aggressive monetary tightening. Investors interpreted the data as a sign that inflation may have peaked, boosting confidence in Philippine assets.

Despite the advance, trading activity remained relatively subdued. Total value turnover reached P6.05 billion, while foreign investors remained net sellers, recording net outflows of about P103.7 million, suggesting local investors were the primary drivers of the market’s gains.

Sectoral performance mixed

Sector performance was mixed. Industrials led the rally, rising 0.68 percent, benefiting from the prospect of easing inflation and lower financing pressures. Mining and Oil declined 1.10 percent, partly reflecting softer crude oil prices and lingering uncertainty over the Middle East situation.

ACEN Corp. emerged as the day’s strongest index performer, surging 11.29 percent to P3.45, while DMCI Holdings Inc. was the main laggard, falling 2.18 percent to P8.98.

The peso likewise strengthened against the US dollar, closing at P61.47 from P61.625 on 4 June. This represented an appreciation of 15.5 centavos, or 0.25 percent.

The softer inflation reading boosted investor confidence that price pressures may be easing and reduced concerns over the need for more aggressive monetary tightening.

Peso strength

The strength of the peso was already evident during the morning session, with the Bankers Association of the Philippines weighted average at P61.524, stronger than the previous day’s closing rate of P61.625, indicating sustained dollar selling and peso demand throughout the trading day.

Global currency markets also provided support as the US Dollar Index (DXY) slipped to around 99.3, reflecting profit-taking in the greenback ahead of key US economic data releases.

Meanwhile, geopolitical tensions involving the United States, Israel, and Iran remained elevated but did not materially escalate over the past 24 hours, helping temper safe-haven demand for the dollar.

The peso traded between P61.40 and P61.58 during the session before settling at P61.47, while the foreign exchange settlement rate improved to P61.524 from P61.644 the previous day.