Peso seen to weaken on hawkish Fed bets
THE PESO could depreciate this week as the market expects the US Federal Reserve to tighten its policy stance faster amid improving economic prospects.
The local unit ended trading at P50.35 per dollar on Friday, shedding nine centavos from its P50.26 close on Thursday, data from the Bankers Association of the Philippines showed.
Week on week, it appreciated by a centavo from its P50.36 finish on Dec. 3.
The local unit depreciated on Friday amid a wider trade deficit, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The country’s trade deficit widened to $4.01 billion in October from the $2.04-billion gap a year earlier, based on data released by the Philippine Statistics Authority on Friday. This also marked the biggest deficit since the $4.27 billion posted in January 2019.
Exports increased by 2% year on year to $6.41 billion in October, slower than the 6.4% growth in September, while imports surged by 25.1% to $10.43 billion.
Meanwhile, market sentiment slightly improved on findings about how some coronavirus disease 2019 (COVID-19) vaccines gave ample protection against the Omicron variant, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.
Reuters reported Wednesday that BioNTech and Pfizer, Inc. said three shots of their vaccines resulted to neutralizing the new Omicron variant in a laboratory test, showing hopes that booster shots could provide protection from the new variant.
Israeli researchers also said on Saturday they found that a three-shot course of the Pfizer/BioNTech COVID-19 vaccine provided significant protection against the new Omicron variant.
For this week, Mr. Asuncion said the market will be waiting for Fed’s policy statement as officials have become more hawkish in recent remarks.
The Federal Open Market Committee will have its last policy review for this year from Tuesday to Wednesday.
Fed Chairman Jerome H. Powell and other central bank officials have said they will be assessing the need to speed up the tapering of their asset purchases to conclude it within a few months. Some officials have also floated the possibility of raising the interest rates by 2022.
Mr. Ricafort said the market will also factor in the Monetary Board’s policy decision on Thursday.
All 15 analysts in a BusinessWorld poll held last week said the Philippine central bank will likely keep rates steady on Thursday as there is still need to support growth to make it more sustainable.
The possible impact of the Omicron variant on the economy could also cause policy makers to remain accommodative, they said.
For this week, Mr. Ricafort gave a forecast range of P50.10 to P50.50, while Mr. Asuncion expects the local unit to move within P50 to P50.50 versus the greenback. — L.W.T. Noble with Reuters
