THE PESO opened the week lower versus the greenback on Monday as market players stayed on the sidelines ahead of President Rodrigo R. Duterte’s second State of the Nation Address (SONA) and the US Federal Reserve’s policy meeting this week.
The local unit closed at P50.735 against the greenback yesterday, down by two-and-a-half centavos from Friday’s P50.71-to-the dollar finish.
The peso opened the session stronger at P50.69 versus the foreign currency, close to its intraday peak of P50.68 against the greenback. Its weakest level for the day was seen at P50.78 per dollar.
Traders attributed the peso’s weak close against the greenback to investors’ wait-and-see stance ahead of Mr. Duterte’s second SONA yesterday.
“The peso moved sideways today due to caution ahead of President Duterte’s SONA and the monetary policy meeting of the US Federal Reserve,” one trader said by e-mail on Monday.
Similarly, another trader said, “The dollar-peso traded in a very light or quiet session after total volume was really low.”
“This is because market is just awaiting the President’s SONA. I think basically the business community wants to hear Mr. Duterte’s infrastructure spending, his legislative agenda, which will support the government’s tax reform program,” the trader noted.
Dollars traded stood at $284.9 million on Monday, dropping from the $468.16 million logged on Friday.
Under the government’s “Build, Build, Build” strategy, economic managers of Mr. Duterte wants to raise the share of infrastructure spending to 7.4% of gross domestic product (GDP) by 2022, from a 4.7% share in 2016.
The Duterte administration plans to spend around P847.22 billion this year on infrastructure alone, which is equivalent to 5.32% of the country’s total GDP.
According to the trader, should Mr. Duterte make positive remarks about his economic plans during this term, foreign investors could regain interest in the local market.
“If the president says something positive regarding these things, maybe the business community could suddenly have interest, even the offshore market, to try to buy Philippine assets again,” the trader said.
The trader however said the peso continued to be the weaker currency compared to its regional peers versus the dollar. “For now, the peso remains to be weak compared to other Asian currencies due to BoP (balance of payments) and current account deficit and too many imports, as well as the martial law extension in Mindanao.”
The country’s BoP position widened to a $569 million deficit last month coming from a $59 million shortfall in May and reversing a $418 million surplus posted in June 2016. The monthly figure is also the largest since a peak of $1.671-billion deficit logged in November last year, and brought the first-half tally to a $706-million deficit. This compares to a $634-million surplus during the first six months of 2016.
For Tuesday, one trader said the exchange rate could settle within the P50.55 to P50.85 range while the other trader said the peso could close higher versus the greenback at the P50.50 level should investors deem Mr. Duterte’s SONA positive. However, should sentiment sour, the local currency could plunge to as low as P50.60 to P50.96 versus the dollar.
“The peso might depreciate amid likely strong US data on manufacturing and existing home sales,” one trader said. — Janine Marie D. Soliman