THE PESO is seen to move sideways against the dollar this week due to a possible rate hike from the local central bank as well as geopolitical concerns abroad.
The peso strengthened slightly on Friday, closing the session at P53.51 against the greenback, two centavos higher than Thursday’s finish after the Bangko Sentral ng Pilipinas (BSP) hinted on a possible rate hike next month.
Week on week, the peso ended flat from its closing rate on July 13.
On Friday, a foreign exchange trader said the market will take its cue from hints that the BSP will raise benchmark rates anew during its next monetary policy meeting in August.
“We heard that the BSP might be aggressive in trying to quell inflation expectations. That might be a key moving forward,” the trader said in a phone interview on Friday.
On Friday, the chief of the monetary authority said it is considering a hike in benchmark rates to temper inflation expectations.
“Let me say that the BSP is considering strong follow-through monetary adjustment at the next meeting of the Monetary Board in August,” BSP Governor Nestor A. Espenilla said.
He added that sustained pressures on the local currency could adversely affect inflation expectations amid “strong and healthy” fundamentals.
The trader noted that the BSP might raise its interest rates by 25 basis points or even 50 basis points if it is more aggressive.
Meanwhile, Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines, said the peso might move sideways this week with a downward bias as “geopolitical noise concerning trade and interest rates might weigh down on the greenback.”
In tweets, US President Donald J. Trump accused European Union and China of illegally manipulating its currencies.
“China, the European Union and others have been manipulating their currencies and interest rates lower,” Mr. Trump said Friday night, adding that it is “taking away our big competitive edge” while the greenback strengthened.
“His comments also included some criticisms about the rate of US interest rate normalization, which [Mr.] Trump judged as being disadvantageous to the US economy,” Mr. Dumalagan added, referring to the US president’s interview with CNBC.
He added in the “Squawk Box” program that he was ready to slap tariffs on all $500 billion of imported goods from China, threatening to escalate the trade policy spat that has shook financial markets, Reuters reported.
From Tuesday to Thursday, the greenback might rebound slightly amid “likely firm US economic data” on housing, services and manufacturing, supporting the of at least two more rate hikes this year from the US Federal Reserve, the market economist added.
For this week, Mr. Dumalagan sees the peso moving between P53.15 and P53.65 versus the dollar, while the trader gave a slimmer forecast range of P53.30-P53.55. — Karl Angelo N. Vidal