The Philippine peso recovered against the US dollar on Wednesday, as market participants anticipated softer US consumer inflation data that could reduce expectations of a Federal Reserve rate hike next month.

The local currency strengthened by eight centavos to close at P61.18 per dollar, up from its P61.26 finish on Tuesday, according to data from the Bankers Association of the Philippines' website. The peso opened Wednesday's session at P61.35, weaker than the previous close, and fell to an intraday low of P61.41 before rebounding to its session-best closing level of P61.18.

Trading volume declined, with dollars exchanged falling to $1.46 billion from $1.599 billion in the prior session.

"The dollar-peso closed lower, most likely on expectations of softer US inflation data set to be released tonight," a trader said in a phone interview.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message that the peso was also supported by a softer increase in global crude oil prices. The Philippines is a net importer of petroleum, and movements in global oil prices have a direct bearing on the country's import bill and, consequently, on the peso's exchange rate.

For Thursday, the trader forecasts the peso trading in a range of P60.90 to P61.30 per dollar, while Mr. Ricafort projects a narrower band of P61.05 to P61.30.

Meanwhile, the US dollar edged higher on Wednesday, supported by renewed tensions in the Gulf region, as markets awaited upcoming US economic data for signals on the Federal Reserve's policy trajectory, Reuters reported.

Oil prices ticked up after the United States and Yemen's Iran-aligned Houthis reported separate attacks on shipping on Tuesday. Tehran stated that the Strait of Hormuz would remain closed unless Washington accepts its conditions. Investors typically seek the safe-haven dollar when concerns intensify about the economic fallout from energy shocks tied to the Iran conflict.

Analysts noted that Friday's soft US jobs report did not significantly pressure the greenback, as markets increasingly expect inflation to be the determining factor for the Fed's next interest rate decision. This dynamic reflects a broader pattern in 2025, in which Federal Reserve policy expectations have been a primary driver of emerging market currency movements, as higher US rates tend to draw capital toward dollar-denominated assets.

Federal Reserve Bank of Chicago President Austan Goolsbee reinforced this view on Tuesday, saying he was more concerned about inflation remaining too high than about labor market weakness.

Economists expected data due later in the session to show that inflation picked up last month, following a moderation in June when oil prices declined on hopes of an Iran peace deal.

"Consensus is looking for a reasonably subdued set of numbers," said Chris Turner, global head of markets at ING. "A soft number should drag market pricing of a September Fed rate hike away from a 50% probability in favor of no change."

The primary focus for markets this week is the US inflation data released later on Wednesday, which is expected to provide clarity on the direction of Fed interest rates. Last week's softer-than-expected jobs report and a press conference by Fed Chair Kevin Warsh last month did little to resolve market uncertainty.

Fed funds futures indicate a 50% probability that the central bank will leave rates unchanged at its two-day policy meeting concluding September 16, according to the CME Group's FedWatch tool. The Bangko Sentral ng Pilipinas, which has broadly tracked the Fed's tightening cycle to manage capital outflows and imported inflation, will also be watching the data as it weighs its own policy stance.

The US dollar index, which measures the greenback against a basket of six currencies, was up 0.05% at 99.85.

— Aaron Michael C. Sy with Reuters