Peso may rise as jobs data boost Fed hopes
THE PESO may continue to rise against the dollar this week following weaker-than-expected US jobs data released on Friday, which bolstered hopes for a September rate cut by the US Federal Reserve.
On Friday, the local unit closed at P58.145 per dollar, jumping by 17.5 centavos from its P58.32 finish on Thursday, data from the Bankers Association of the Philippines showed.
However, week on week, the peso dropped by P1.35 from its P57.11 close on July 25.
“The dollar-peso initially ran to highs of P58.63 on increased hawkish US Federal Reserve data because of the higher-than-expected core consumer price index… However, caution ahead of tariff announcements and nonfarm payrolls data caused it to hit lows of P58.13,” a trader said in a phone interview on Friday.
“The BSP (Bangko Sentral ng Pilipinas) signaled lately that it has room to intervene in the foreign exchange market during big and sudden foreign exchange moves that may have impact on inflation. As a result, the US dollar-peso exchange rate corrected lower,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
For this week, the peso’s movement would depend on the US jobs report released on Friday, the trader said. The trader sees the peso moving between P57.90 and P58.40 per dollar this week, while Mr. Ricafort expects it to range from P57.85 to P58.35.
US employment growth was weaker than expected in July while the nonfarm payrolls count for the prior two months was revised down by a massive 258,000 jobs, suggesting a sharp deterioration in labor market conditions that puts a September interest rate cut by the Federal Reserve back on the table, Reuters reported.
The Labor department’s closely watched employment report on Friday also showed the unemployment rate rose to 4.2% last month as household employment declined.
Nonfarm payrolls increased by 73,000 jobs last month after rising by a downwardly revised 14,000 in June, the fewest in nearly five years, the Labor department’s Bureau of Labor Statistics (BLS) said.
Payrolls for May were slashed by 125,000 to a gain of only 19,000 jobs. The BLS described the revisions to May and June payrolls data as “larger than normal.”
The Federal Reserve on Wednesday left its benchmark interest rate in the 4.25%-4.5% range. Fed Chair Jerome H. Powell’s comments after the decision undercut confidence the central bank would resume its policy easing in September as had been widely anticipated by financial markets and some economists.
Financial markets now expect the Fed to resume its monetary policy easing next month after pushing back rate-cut expectations to October in the wake of Wednesday’s policy decision. — A.M.C. Sy with Reuters
