Peso seen climbing on GDP data

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THE PESO is expected to strengthen against the dollar this week as strong third quarter Philippine economic growth, as well as weak US developments, will likely temper the greenback’s ascent.

On Friday, the local currency moved sideways to close at P51.245 against the greenback, three centavos stronger than the P51.27-per-dollar finish on Thursday.

“The dollar is expected to depreciate this week, as likely stronger Philippine data on third quarter economic growth and possibly softer US reports on inflation and retail sales may reduce the dollar’s appeal versus the local currency,” Guian Angelo S. Dumalagan, market analyst at  Land Bank of the Philippines (Landbank), said in an e-mail.

The Philippine Statistics Authority will release the third quarter gross domestic product (GDP) data on Friday.

Data on foreign direct investments, trade, and manufacturing released last week may make or break the third-quarter print.

On Friday, the central bank booked $1.2 billion foreign direct investment inflows in August alone, the biggest in 16 months, mainly driven by continued confidence in President Rodrigo R. Duterte’s administration.

However, GDP growth may have been dragged lower by slower trade and manufacturing data booked for September, as merchandise export sales saw a 4.3% slowdown, and factory output in terms of volume on production index declined 1.3%.

Aside from an expected strong GDP growth turnout, traders are also expecting weak US economic data and a possible delay in the US government’s planned corporate tax cuts, which may further strengthen the local currency.

“In the first four days of the week, the dollar might show a downward bias due to expectations of weaker US reports on retail sales, producer prices, and consumer prices. News about a possible delay in the US tax cut may also reduce the greenback’s attractiveness,” Landbank’s Mr. Dumalagan said.

He added that these developments “could solidify views of a gradual pace of US interest rate normalization under the leadership of incoming [Federal Reserve] Chair Jerome [H.] Powell.”

Unease among Republicans about a massive increase in the federal deficit could complicate passage of two tax-cut bills working their way through the US Congress, endangering President Donald J. Trump’s top legislative priority.

The Committee for a Responsible Federal Budget, a nonpartisan budget watchdog in Washington, on Friday called a Senate Republican tax plan a “fatally flawed budget buster,” likening it to Republican legislation in the House of Representatives that the House tax committee has approved.

On another note, a trader is expecting a lower trading volume this week, as “most market players were on leave for the ASEAN (Association of Southeast Asian Nations) Summit despite banks being open.”

Traders are expecting the peso to trade between P51 and P51.45 against the dollar. — K.A.N. Vidal with Reuters