Peso may rise on remittance data

THE PESO may appreciate further versus the dollar this week in anticipation of strong remittance data, but risk-off sentiment may be seen as the market awaits clearer economic plans from the next administration.

The local unit closed at P52.45 per dollar on Friday, gaining 4.5 centavos from its P52.495 finish on Thursday, based on Bankers Association of the Philippines data.

It also strengthened by 31 centavos from its P52.19 finish a week earlier.

The peso opened Friday’s session at P52.43 against the dollar. Its weakest showing was at P52.48, while its intraday best was at P52.39 versus the greenback.

Dollars exchanged declined to $978.4 million on Friday from $1.08 billion on Thursday.

The peso strengthened versus the dollar on Friday following stronger-than-expected economic growth in the first quarter, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Philippine gross domestic product (GDP) expanded by a better-than-expected 8.3% in the first quarter, the Philippine Statistics Authority reported on Thursday. This is a turnaround from the 3.8% contraction in the same period of 2021 and faster than the 7.8% growth in the October to December period.

Socioeconomic Planning Secretary Karl Kendrick T. Chua said the first-quarter growth print has surpassed the pre-pandemic GDP level. Economic managers had expected this rebound to happen in the second half of the year.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail that the market also factored in hawkish signals from the US Federal Reserve.

Last week, Federal Reserve Bank of Atlanta President Raphael Bostic said they may consider bigger moves in increasing interest rates to manage growth if inflation remains persistently elevated, Bloomberg reported.

“If inflation stays at high levels or levels that are too high — by too high, it’s really not moving back towards our 2% target — then I am going to be supporting moving more,” Mr. Bostic said.

For this week, Mr. Ricafort said the market will monitor March remittance data expected to be released on Monday, May 16.

Cash remittances increased in February by 1.3% to $2.509 billion, but this was the slowest pace in 13 months. Analysts said this reflected the impact of rising infections in many host countries.

Mr. Ricafort said the central bank’s policy-setting meeting on Thursday may also affect peso-dollar trading.

A BusinessWorld poll held last week showed 9 out of 17 analysts expect the central bank to keep its key rates at record lows, while eight see a possibility of a 25-basis-point (bp) rate hike at the BSP’s meeting.

A slim majority of analysts said the BSP may choose to hold fire as it waits for more evidence that economic recovery is already entrenched, while some are pricing in a rate increase due to stronger-than-expected first-quarter growth that could further stoke inflation.

The central bank has not touched borrowing costs since slashing rates by a total of 200 bps in 2020.

Another factor that could drive market sentiment this week is clarity on the economic team and plans of the presumptive President-elect Ferdinand R. Marcos, Jr., Mr. Asuncion said.

For this week, Mr. Asuncion gave a forecast range of P52.20 to P52.70, while Mr. Ricafort expects the local unit to move within P52.25 to P52.55 per dollar. — L.W.T. Noble