THE PESO may strengthen this week ahead of the release of central bank data and as the market has already priced in expectations of policy tightening by the US Federal Reserve.

The local unit closed at P51.11 per dollar on Friday, declining by seven centavos from its P51.04 finish on Thursday, based on data from the Bankers Association of the Philippines.

Still, it strengthened by 24 centavos from its P51.35-per-dollar close a week earlier.

Hawkish signals from US Federal Reserve officials caused the market to opt for the safe-haven greenback and led to the peso’s weakness last week, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

In a congressional hearing for his confirmation, Fed Chair Jerome H. Powell on Tuesday said the economy should be able to weather the impact of the current surge and is ready to face tighter monetary policy, Reuters reported.

Separately, Fed Governor Lael Brainard said the central bank is prepared to quell inflation by raising interest rates.

US inflation rose by 7% year on year in December, the highest level since June 1982.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message said there was cautious sentiment in the market last week amid the Omicron-driven infection spike.

Active coronavirus disease 2019 (COVID-19) cases have climbed by more than 30,000 since Wednesday, based on data from the Department of Health. New cases reached a record high of 39,004 on Saturday, bringing active infections to 280,813.

For this week, Mr. Asuncion said the market will look at the impact of Typhoon Odette on food supply and inflation. He said investors have already priced in signals of policy tightening from the Fed.

Crop damage from Typhoon Odette reached P13.4 billion as of Jan. 14, based on data from the Department of Agriculture.

Meanwhile, Mr. Ricafort said the release of the latest balance of payments (BoP) data and developments in the country’s COVID-19 situation will affect sentiment this week.

December BoP data is expected to be reported on Jan. 19, based on the central bank’s advance release calendar.

For this week, Mr. Ricafort gave a forecast range of P50.90 to P51.30, while Mr. Asuncion expects a wider trading band of P50.80 to P51.30 per dollar. — L.W.T. Noble with Reuters