THE PESO may trade sideways against the dollar this week as the market awaits the release of minutes of the US Federal Reserve’s policy meeting this month for more leads on their future policy path.

The local unit closed at P57.62 per dollar on Friday, weakening by 15.5 centavos from its P57.465 finish on Thursday, Bankers Association of the Philippines data showed.

Week on week, the peso likewise depreciated by 20 centavos from its P57.42 finish on May 10.

The peso weakened against the dollar on Friday due to hawkish comments from the Fed from the previous day, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

The dollar retreated against major currencies on Friday as market speculation continues to swirl about the timing of Federal Reserve interest rate cuts amid signs of cooling yet persistent inflation and a softening US economy, Reuters reported.

While consumer prices for April, reported on Wednesday, rose less than expected — leading to a risk-on flavor in equity markets — various Fed officials have sounded words of caution about when rates may fall, limiting the dollar’s decline last week.

The dollar index, which tracks the US currency against six peers, slid 0.04% to 104.44 after earlier trading about 0.3% higher.

Fed policy makers said on Thursday that still-high inflation warrants keeping rates at current levels, and that reaching the Fed’s 2% inflation target will take longer than previously thought.

Less hawkish comments from the Bangko Sentral ng Pilipinas (BSP) also dragged down the peso, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

BSP Governor Eli M. Remolona, Jr. last week said the Monetary Board could begin their easing cycle with a cut worth 25 basis points (bps) as early as their Aug. 15 policy meeting, adding that he expects one or two rate cuts within the second semester.

The Monetary Board kept its target reverse repurchase rate at a 17-year high of 6.5% for a fifth straight meeting on Thursday, as expected by 17 out of 19 analysts in a BusinessWorld poll. Interest rates on the overnight deposit and lending facilities were likewise kept at 6% and 7%, respectively.

The central bank raised borrowing costs by a cumulative 450 bps from May 2022 to October 2023.

For this week, Mr. Ricafort said the peso will move depending on the minutes of the Fed’s policy meeting this month, which will be released on May 22, Wednesday.

“Economic data and comments from central bank officials will remain as catalysts,” Mr. Roces added.

The US central bank this month kept the fed funds rate unchanged at the 5.25%-5.5% range for a sixth straight meeting.

The Fed hiked interest rates by 525 bps from March 2022 to July 2023.

Mr. Ricafort sees the peso moving between P57.30 and P57.80 per dollar this week, while Mr. Roces expects it to range from P57.20 to P57.50. — A.M.C. Sy with Reuters