THE PESO may weaken against the dollar this week on the back of mixed US economic data, hawkish remarks from the US Federal Reserve and the upcoming release of January Philippine inflation data.

On Friday, the peso moved sideways against the greenback to close at P50.84 as President Donald J. Trump said the US currency “is going to get stronger and stronger,” in contradiction to the statement of US Treasury Secretary Steven T. Mnuchin who said a weak dollar is “good for us.”

“The dollar might move closer to the P51 level this week, despite a string of likely mixed US economic data amid expectations of more hawkish affirmations from the US Federal Reserve (Fed) during its monetary policy meeting,” Guian Angelo S. Dumalagan, market economist of Land Bank of the Philippines, said in an e-mail.

Mr. Dumalagan said the dollar will strengthen in the first four days of the week on the back of “firm” US data on PCE inflation and ADP employment and hawkish hints from the monetary board meeting by the Fed.

Incumbent Fed Chair Janet L. Yellen will leave her post on Feb. 3 to be replaced by Jerome H. Powell.

Although Mr. Powell was considered to be “dovish,” analysts expect that the changing economic conditions, such as the massive tax cuts from Mr. Trump, weaker dollar and stronger global growth among others, will prompt the members of the Federal Open Market Committee to be more hawkish.

“[T]he change in leadership at the US central bank might not cause much volatility due to widespread expectations of US policy continuity under the helm of incoming Fed Chair Powell,” Mr. Dumalagan said.

“A robust growth report from the currency bloc (Euro area) could potentially weaken the dollar against the euro and a basket of other currencies, including the peso, by increasing speculations of more tightening moves from the European Central Bank this year,” Mr. Dumalagan added.

For Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, dollar-peso trading will be driven by expectations on Philippine inflation data.

“I’m expecting inflation to [be slightly] high, but that’s because of the impact of the TRAIN,” Mr. Asuncion said, referring to the Tax Reform on Acceleration and Inclusion act, which provided bigger take-home pays for most Filipinos, while imposing heftier tax on commodities such as fuel, tobacco and sweetened beverages.

For this week, Mr. Asuncion sees the peso moving between P50.60 and P51, while Mr. Dumalagan gave a wider range of P50.60 to P50.30.

“The factors that could reverse the dollar’s forecasted upward bias include unexpected dovish remarks from US policy makers, softer-than-expected US ADP employment data, and increased US political noise,” Mr. Dumalagan noted. — KANV

RELATED ARTICLESMORE FROM AUTHOR