Manila: The local stock market extended its decline on Wednesday, while the peso strengthened against the U.S. dollar amid expectations of another increase in the Bangko Sentral ng Pilipinas' (BSP) key policy rates following the surge in domestic inflation.

According to Philippines News Agency, the Philippine Stock Exchange index (PSEi) slipped by 0.42 percent to 5,946.78 points, while the broader All Shares index fell by 0.47 percent to 3,361.13 points. Most sectoral indices ended in negative territory, except for Financials, which gained 0.81 percent.

Industrial stocks led the decline, dropping 1.64 percent, followed by Mining and Oil, down 1.29 percent; Property, 0.90 percent; Services, 0.44 percent; and Holding Firms, 0.10 percent. Trading volume reached 734.05 million shares valued at PHP7.61 billion. Decliners outnumbered advancers, 116 to 73, while 67 shares were unchanged.

Meanwhile, the peso appreciated to 61.38 against the US dollar from 61.48 in the previous trading session. Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort attributed the peso's gains partly to expectations of another BSP rate hike.

This followed the acceleration of inflation to 7.2 percent in April from 4.1 percent in March, driven mainly by higher oil prices linked to the ongoing Middle East crisis, which also affected the prices of other commodities. The local currency opened Wednesday's trading at 61.48, weaker than Tuesday's opening level of 61.25. It traded within a range of 61.35 to 61.68, bringing the day's average to 61.50. Dollar trading volume rose to USD1.80 billion from USD1.51 billion in the previous session.