Peso likely to weaken as dollar climbs further on positive data

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THE PESO will likely weaken this week as the dollar is seen to remain “relatively strong” amid mixed US economic data as well as geopolitical concerns.

On Friday, the peso dropped to P52.19 versus the greenback from Thursday’s finish of P51.80 following “dovish” remarks from the Bangko Sentral ng Pilipinas, saying the 25-basis point hike will suffice to curb the rising inflation.

Week on week, the peso also fell from its P51.675 finish on May 4.

Markets were closed on Monday for the barangay and Sangguniang Kabataan elections.

Land Bank of the Philippines (LANDBANK) market economist Guian Angelo S. Dumalagan said in an e-mail: “The dollar is expected to remain relatively strong this week, despite likely mixed US economic reports, amid bets of more hawkish statements from US policy makers and potentially softer economic data from Japan and the Eurozone.”

The greenback, Mr. Dumalagan said, may start the week on a negative note as it is seen to correct due to profit taking following its “unexpectedly strong” performance last week.

“However, it might be tempered by upbeat US economic reports on consumer sentiment and consumer expectations,” Mr. Dumalagan added, noting that the “likely hawkish” remarks from US Federal Reserve (Fed) officials James B. Bullard and Loretta J. Mester may also temper the weak dollar.

Consumer sentiment in the US was at 98.8 in a preliminary reading in May. This was slightly higher than the 98.5 expected in a Reuters poll of economists.

“These developments are expected to reinforce views that the US Federal Reserve remains on track to hiking rates a few more time this year,” Mr. Dumalagan said.

Toward the end of the week, the peso may weaken as the dollar moves sideways with an upward bias due to likely hawkish speeches from Fed officials and US economic data due for release.

“The dollar is expected to move sideways with an upward bias amid possibly more hawkish remarks from various US policy makers, mixed US economic reports,” LANDBANK’s market economist said, adding that expectations of weaker economic growth data from the Eurozone and Japan may also pull down the dollar.

Meanwhile, Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, said the geopolitical concerns in Iran as well as the impending meeting of US President Donald J. Trump and North Korean leader Kim Jong-un will be considered by investors.

“I think everybody’s looking at the Iran issue including the US-[North Korea] meeting,” Mr. Asuncion said. “Oil prices will [also be a] key.”

On Tuesday last week, Mr. Trump said the US was withdrawing from the 2015 nuclear deal negotiated by the Obama administration, Reuters reported.

So far, six other countries remain in the accord, including China, France, Germany, Iran, Russia and UK, which placed controls on Iran’s nuclear program.

Mr. Trump also announced that he will be meeting with Mr. Kim in Singapore on June 12.

“Positive results from the meeting may encourage investors further to invest not just in the Philippines but the whole region as well,” Mr. Asuncion said. “It may strengthen the peso in the long run.”

For this week, Mr. Dumalagan sees the peso moving between P51.80 and P52.40 versus the dollar, while Mr. Asuncion gave a P52-P52.50 range. — Karl Angelo N. Vidal with Reuters