THE PESO is seen to weaken against the dollar this week on the back of upbeat US economic reports and hawkish expectations on the remarks of American policy makers.
Last Wednesday, the local currency ended the session at P52.16 versus the dollar, 16 centavos stronger than its P52.32 finish on Tuesday as investors took profits ahead of the Holy Week break.
Week on week, the peso also strengthened from its P52.39-per-dollar finish on March 23.
Guian Angelo S. Dumalagan, market analyst at Land Bank of the Philippines (LANDBANK), said in an e-mail that the greenback might generally recover this week “fuelled by relatively strong US economic reports and more hawkish remarks from various US policy makers.”
Last Wednesday, the US Commerce Department announced that the US economy grew 2.9% in the last quarter of 2017, faster than the previously recorded 2.5% as well as the 2.7% revision according to a poll from Reuters. However, the October-to-December figure was slightly slower compared with the 3.2% figure logged in the previous quarter.
According to Mr. Dumalagan, the “upbeat” gross domestic product data, as well as reports on US personal consumption expenditures index, personal spending, and personal income, will likely push the dollar upwards in the first three days of the week, as these reports support views of at least two more rate hikes from the Federal Reserve this year.
“The impact of these strong US reports might be amplified by the recent remark of [Atlanta Fed President Raphael W. Bostic] about the need to raise rates closer to a neutral level of 2.9%,” Mr. Dumalagan added, noting that three other Fed officials might echo Mr. Bostic’s remarks during their speeches this week.
Meanwhile, a trader interviewed on last week said investors may look at the domestic inflation figure to be released on Thursday.
A BusinessWorld poll of nine economists showed that inflation likely quickened to 4.2% last month, breaching the 2-4% target range set by the Bangko Sentral ng Pilipinas (BSP) for this year.
The “upbeat” inflation report of the BSP and European Central Bank (ECB), LANDBANK’s market economist said, will raise the chances of a rate hike this year by monetary authorities.
“Consequently, expectations of higher rates domestically and in the Eurozone could lessen the greenback’s attractiveness against the peso and a basket of other currencies,” he added.
For this week, Mr. Dumalagan sees the peso moving between P51.85 and P52.35 versus the dollar, while the trader gave a slimmer range of P52.15 to P52.45.
“The factors that could reverse the dollar’s projected upward bias include hints from BSP officials of a possible rate hike in May 2018, remarks from the ECB suggesting a rate increase in December, renewed political noise on global trade protectionism, and unexpected dovish comments from US Federal Reserve officials,” Mr. Dumalagan noted. — Karl Angelo N. Vidal