THE PESO will likely weaken this week as the dollar is seen to strengthen on the back of the upbeat US economic data as well as a likely hawkish statement out of the policy meeting of the Federal Reserve.
The local unit strengthened on Friday as it closed the session at P53.285 against the greenback, 15 centavos stronger than its P53.435 finish on Thursday on the back of hawkish remarks from the Bangko Sentral ng Pilipinas (BSP).
Week on week, the peso also strengthened from its P53.51-per-dollar finish on July 20.
Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines, said the dollar may bounce back this week amid a “string of possibly firm US economic data and a hawkish Fed” during its meeting.
However, the dollar’s ascent might be capped by expectations of future monetary policy tightening from the BSP as well as the central banks of Europe and Japan.
On Friday, a foreign exchange trader said the peso will likely lose its strength versus the dollar on Monday due to likely upbeat US gross domestic product (GDP) growth which was released later that day Manila time.
The American economy grew 4.1% in the second quarter, its fastest pace in nearly four years, as consumers boosted spending and farmers rushed shipments of soybeans to China ahead of the imposition of trade tariffs earlier this month, Reuters reported.
US President Donald J. Trump hailed the economic data, saying that the US “accomplished an economic turnaround of historic proportions.”
However, Mr. Dumalagan said the dollar may “move sideways with an upward bias” on Monday as the upbeat US economic growth is accompanied by the upward revision of July consumer sentiment and the weaker-than-expected personal consumption expenditures price index.
“Overall, latest US economic reports keep the US Federal Reserve on track to two more US rate hikes before the year ends,” he said.
Mid-week, Mr. Dumalagan said the dollar may shed some of its gains amid some speculations of a policy tweak from Bank of Japan as well as positive GDP growth data in Europe which may support views of an interest rate adjustment from the European Central Bank in the future.
The market analyst also noted that the greenback might resume its upward trend due to likely hawkish tone of the Fed’s policy gathering.
“While the US central bank is not expected to hike its rates again in August 2018, it may provide more hints of another rate adjustment in September and December this year,” Mr. Dumalagan added.
For this week, he is expecting the peso to move between P53 and P53.60, while the trader sees the pair to trade between a P53-P53.40 range. — Karl Angelo N. Vidal