THE PESO is seen to move sideways this week as the dollar may strengthen a tad following the US Federal Reserve chair’s speech and amid lingering geopolitical tensions overseas.
The peso closed at P53.465 versus the greenback on Friday, climbing slightly from its P53.48-per-dollar finish on Thursday amid lack of fresh leads.
Week on week, however, the local unit declined from the P53.425-per-dollar finish last Aug. 17.
A foreign exchange trader said on Friday that the speech of Fed chair Jerome H. Powell will be the main driver of dollar-peso trading as markets reopen on Tuesday.
“A September hike is a pretty done deal. Investors are awaiting the tone of his speech, but it will likely be hawkish,” the trader said in a phone interview on Friday.
Mr. Powell on Friday defended the US central bank’s push to raise interest rates as healthy for the economy and signalled more hikes were coming despite President Donald Trump’s criticism of higher borrowing costs.
The Fed, which began to tighten monetary policy in 2015, has raised rates twice this year and is widely expected to do so again next month and in December.
Speaking at a research symposium in Jackson Hole, Wyoming, Mr. Powell said he wanted to “explain today why my colleagues and I believe that this gradual process … remains appropriate.”
“The economy is strong. Inflation is near our 2% objective, and most people who want a job are finding one … If the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate.”
Mr. Powell made no mention of Mr. Trump’s criticism of the Fed’s monetary policy. In an interview with Reuters on Monday, Mr. Trump said he was “not thrilled” with Mr. Powell’s Fed for raising rates and said the central bank should do more to help boost the economy.
In his speech, Mr. Powell simply made the case that gradual rate hikes are the best way to protect the US economic recovery and keep job growth as strong as possible and inflation under control.
Land Bank of the Philippines market economist Guian Angelo S. Dumalagan said the dollar may move sideways versus the peso with an upward bias as Mr. Powell’s speech is seen to support the greenback.
“US Fed Chair Powell’s speech at the Jackson Hole Symposium is expected to support the greenback as it affirmed views of gradual US rate increases ahead,” Mr. Dumalagan said in an e-mail on Saturday.
The Fed has raised benchmark rates twice this year and is widely expected to hike again in September and December.
This will be reinforced by safe-haven buying amid geopolitical noise concerning US relations with China and North Korea.
“US President Donald Trump recently cancelled the upcoming trip to North Korea of Secretary of State Mike Pompeo due to lack of progress on the disarmament issue,” Mr. Dumalagan noted.
To add, Washington and Beijing pushed through the imposition of tariffs against each other’s imports following their lower-level meetings last week which ended with no major accomplishments.
However, the dollar’s appreciation might be tempered by last Friday’s weaker-than-expected US durable goods orders data.
Toward the end of the week, Mr. Dumalagan said the dollar may bounce back supported by “possibly firm” US data on second-quarter economic growth as well as personal consumption expenditure inflation.
“The second quarter economic expansion of the US is expected to be affirmed at 4.1%, a huge leap from the 2.2% growth in the first quarter,” he said, adding that the PCE (personal consumption expenditure) inflation, the Fed’s preferred inflation gauge, might remain steady at 2.2%, above the 2% target.
For this week, Mr. Dumalagan sees the peso moving between P53.15 and P53.65 versus the dollar, while the trader gave a P53.30-P53.55 forecast range. — Karl Angelo N. Vidal with Reuters