MANILA (UPDATE) - The Philippine peso surged to a new record for 2016 as the US dollar weakened further with bets for a near term interest rate hike from the US Federal Reserve now dashed.

The local currency gained over P0.32 on Wednesday, settling at P46.03 against the greenback--a five-month high.

The rise was also backed by solid volume at nearly a billion dollars.

"The strength of regional currencies (including peso) today is carry over momentum from the more dovish Fed comments yesterday. As I said yesterday, BSP [Bangko Sentral ng Pilipinas] is monitoring market price action. So far, the peso has continued to move in the middle of the pack of regional currencies thus no need for specific action on our part at this time," BSP Governor Amando Tetangco Jr. said.

BSP Deputy Governor Diwa Guinigundo, meanwhile, said "such movement of the peso should not unduly concern us because it simply reflects both good fundamentals and more favorable market sentiment."

"While its impact on inflation management is broadly positive and two-month average is less than the lower end of the target, the recent power adjustment and the diminishing base effects should keep us closer to the target inflation rate of 2-4 percent. Moreover, oil and other commodity prices are beginning to show more normal trends such that by mid 2017, supply and demand are expected to be virtually convergent. Hence, we keep to our latest estimates of 2.1 percent and 3.1 percent for 2016 and 2017, respectively," he said.

The US dollar has been strengthening against most currencies after the Federal Reserve raised interest rates for the first time since 2006 in December last year.

But as Fed chair Janet Yellen hints at a slower pace of future rate hikes, investors have started to rush to "riskier assets" like the peso in hopes of higher returns.

The dollar posted its third day of decline on Wednesday.