THE PESO may move sideways this week as the expected effect of two hurricanes on the United States could temper potentially hawkish remarks in the upcoming Federal Reserve meeting following upbeat an inflation report.

The local unit closed at P51.165 against the greenback on Friday, unchanged from the previous session. Week on week, the peso was weaker by 26 centavos from the P50.905-a-dollar close recorded last Sept. 8.

Traders and analysts said weak US retail sales and industrial output reports and likely mixed data on home sales to be released this week could cause the US Federal Open Market Committee to hold policy rates during its two-day meeting, which starts tomorrow.

US retail sales unexpectedly fell in August and industrial output recorded its biggest drop since 2009 as Hurricane Harvey disrupted activity, suggesting the storm could dent economic growth in the third quarter.

Harvey, which lashed Texas in the last week of August, also has impacted the labor market. Hurricane Irma, which struck Florida last weekend, also is likely to hurt the economy, though analysts expect a rebound in the fourth quarter.

The Commerce Department said retail sales dropped 0.2% last month, the biggest decline in six months as motor vehicle sales tumbled 1.6%. Sales of building materials, electronics and appliances as well as clothing also fell.

In a separate phone interview, another trader said: “Basically, the reason why we think the dollar will depreciate, it’s because of the hurricanes. So the economy will have a difficult time.”

Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines, however said that the dollar may see an upward bias this week over possible hawkish hints of the Bangko Sentral ng Pilipinas (BSP) and the Fed in their meetings this week.

“In the first four days of the week, the dollar might cautiously appreciate, as market players anticipate hawkish remarks from the US Federal Reserve following upbeat US inflation data in August 2017,” he said in an e-mail over the weekend.

“The recent uptick in US inflation keeps open the possibility of another US rate hike before the year ends. Likely hawkish hints from the BSP during its meeting this week might temper the dollar’s gain,” Mr. Dumalagan added.

Traders estimate a P51.10 to P51.50 range in the dollar-peso market, while Mr. Dumalagan forecasts a P51.00 to P50.40 band. — Elijah Joseph C. Tubayan with Reuters

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