THE PESO is seen to weaken further against the dollar due to renewed tensions between the United States and China as well as expectations of a less hawkish stance from the local central bank.
On Thursday, the local unit slipped to close at P53.27 against the greenback, weaker by four centavos from its P53.23-per-dollar finish on Wednesday following an interest rate hike from the US Federal Reserve. Week-on-week, the peso also declined from its P52.70-per-dollar finish on June 8.
In an e-mail, Land Bank of the Philippines (LANDBANK) market economist Guian Angelo S. Dumalagan said the dollar will likely remain strong throughout the week amid renewed geopolitical tensions overseas, potentially upbeat US economic data, as well as the likely less hawkish policy stance of the Bangko Sentral ng Pilipinas (BSP).
“On Monday, the dollar might further appreciate due to safe-haven buying following last Friday’s tit-for-tat tariff announcements by the US and China,” he said.
“Increased geopolitical tension should help bolster the greenback, amplifying the impact of last week’s upbeat data on retail sales and consumer sentiment,” he said, adding the economic data exceeded market expectations and puts the Fed on track to hike rates anew.
The Fed raised its interest rates during its June 12-13 meeting by a quarter of a percentage point, the second for this year, amid low unemployment and higher wages.
The peso will continue to depreciate until Wednesday, according to Mr. Dumalagan, due to likely upbeat US data on housing as well as hawkish speeches from various Fed officials.
Towards the end of the week, the LANDBANK market economist noted that the peso might move sideways amid less positive policy guidance from the BSP following its meeting.
In a BusinessWorld poll, six out of 10 economists expect the BSP to stay on hold during their Wednesday policy meeting amid signs of easing inflation.
“While the BSP is expected to remain hawkish due to above-target domestic inflation and tightening policy setting abroad, it may provide a more optimistic view of future price increases amid early signs that the inflationary impact of the TRAIN law is starting to normalize,” Mr. Dumalagan said, referring to the Tax Reform on Acceleration and Inclusion law which was enacted this year.
“The less hawkish tone of the BSP might be accompanied by Fed Chair [Jerome] Powell’s affirmation of the need for more US rate hikes ahead.”
For this week, Mr. Dumalagan expects the peso to move between P53 and P53.60, while a foreign currency trader sees the local unit to trade within the P53.20-P53.50 range.
“If and when the BSP hikes this month probably to quell inflation expectations at the same time to temper peso depreciation, I guess we’re seeing the market to scale back on their expectation for the dollar-peso to continue to move [lower],” the trader noted. — Karl Angelo N. Vidal