Peso may trade sideways ahead of Fed review
THE PESO may move sideways against the dollar this week amid expectations that the US Federal Reserve will hike borrowing costs anew at its policy review.
The local currency closed at P54.755 versus the dollar on Friday, weakening by 23.50 centavos from Thursday’s P54.52 finish, data from the Bankers Association of the Philippines’ website showed.
Week on week, the peso dropped by 35.50 centavos from its P54.40 close on July 14.
The local unit opened Friday’s session at P54.68 per dollar. Its weakest showing was at P54.76, while its intraday best was at P54.56 against the greenback.
Dollars traded went up to $1.17 billion on Friday from the $1.14 billion recorded on Thursday.
The peso declined on Friday amid broad dollar strength, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The dollar gained against a basket of currencies on Friday after data showed that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, boosting expectations the Federal Reserve may continue hiking interest rates if the economy remains strong, Reuters reported.
Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 228,000 for the week ended July 15, the Labor department said.
The dollar had tumbled after cooling consumer and producer inflation releases last week indicated that price pressures may be closer to returning to the Fed’s 2% inflation target.
The dollar index rose 0.62% against a basket of currencies to 100.85.
For this week, the peso may trade sideways ahead of an expected rate hike by the Federal Open Market Committee at its July 25-26 meeting, Mr. Ricafort said.
The Fed will raise its benchmark overnight interest rate by 25 basis points (bps) to the 5.25%-5.5% range on July 26, according to all 106 economists polled by Reuters, with a majority still saying that will be the last increase of the current tightening cycle.
The US central bank paused its tightening cycle in June after hiking its benchmark rate by a cumulative 500 bps to a range between 5% and 5.25%.
The market will also await policy signals from Fed Chair Jerome H. Powell’s press conference after the meeting, Mr. Ricafort added.
He sees the peso trading from P54 to P55 per dollar this week. — A.M.C. Sy with Reuters
