Peso expected to weaken this week
THE PESO may weaken this week as markets expect hawkish remarks from US Federal Reserve officials to reinforce a December rate hike despite possible mixed economic data.
The local currency strengthened by 16.5 centavos on Friday to close at P50.815 per dollar from the P50.980 finish on Thursday. This was due to month-end profit taking which came despite an upward revision in US second-quarter gross domestic product (GDP) growth data.
Week on week, however, the peso weakened by nine centavos from its P50.725-a-dollar close last Sept. 22.
Traders interviewed on Friday said markets will be all eyes on several speeches by Fed officials, with investors expecting these to still be on a hawkish tone.
“The dollar might move sideways this week, with an upward bias, fueled by likely hawkish speeches from various US policy makers,” Land Bank of the Philippines market economist Guian Angelo S. Dumalagan said in an e-mail.
Speaking this week will be Fed Chair Janet L. Yellen, along with Fed officials Robert S. Kaplan and Jerome H. Powell, Patrick T. Harker, Esther L. George, John C. Williams.
However, the upward bias might be tempered by weak personal consumption expenditures, or core inflation, and manufacturing data.
“These reports support views of a gradual pace of US monetary tightening, although they could not eliminate the possibility of another US interest rate hike this year,” he added.
By the end of the week, Mr. Dumalagan said the dollar’s appreciation versus the peso might be capped from likely mixed US data on non-manufacturing and employment.
Moreover, another trader said that likely strong Philippine inflation will reverse the dollar’s projected rise.
The Philippine Statistics Authority will release September inflation data tomorrow.
The second trader added that markets will still be on the lookout for US-North Korea developments.
“If tensions rise, they will be seeking safe-havens such as the dollar. So if ever, we might see a rally,” the trader added.
The second trader expects a P50.70 to P51.20-per-dollar range this week, while Mr. Dumalagan expects the peso to move between P50.65 and P51.15. — Elijah Joseph C. Tubayan
