By Melissa Luz T. Lopez
Senior Reporter
THE PESO could maintain its strength this week ahead of positive inflation and economic growth data expected onshore, which could offset the possible appreciation of the dollar.
The local unit ended the shortened trading week at P53.535 versus the greenback on Oct. 31, stronger than its P53.59-per-dollar finish the previous day. This was the peso’s best showing in nearly two months since it ended at P53.46 on Sept. 3.
Sought for comment, two traders said the peso could move stronger and hit a fresh high in recent weeks in anticipation of better economic data in the Philippines.
“The dollar is expected to depreciate this week amid likely better Philippine economic data on inflation and GDP (gross domestic product) growth,” said Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines.
“While the dollar is expected to weaken overall, its decline might be tempered by strong US labor reports and expectations of more hawkish hints from the US Federal Reserve during its November 2018 policy meeting.”
The US Labor department reported that non-farm payrolls (NFP) went up by 250,000 jobs in October, marking a sharp rebound accompanied by higher wages and a steady unemployment rate. This added confidence that their economy is recovering and is ready for another rate hike from the Fed by December.
Back home, market watchers are anticipating a slower October inflation rate as the Bangko Sentral ng Pilipinas (BSP) has noted that inflation may have already peaked the previous month. The central bank gave a 6.2-7% forecast range for the month, slightly lower than the 6.3-7.1% estimate given for September.
However, a BusinessWorld poll late last week yielded a median inflation forecast of 6.7% to match September’s print. In the same poll, analysts pegged third-quarter GDP growth at 6.3%, better than the six percent expansion from April-June.
Another currency trader said that the US jobs report will “set the tone for the dollar” come Monday.
“Let’s see what the NFP figures will be and it continues to give a positive dollar move, or (if) we are going to see a disappointment, then we’ll see a selldown in the dollar,” the trader said.
This trader expects the currency to trade between P53.50 to P53.75 this week, but noted that the peso may strengthen further.
Meanwhile, Mr. Dumalagan gave a wider range of P53.20 to P53.80.
“The factors that could reverse or temper the greenback’s projected depreciation include weaker-than-expected Philippine GDP growth and higher-than-expected Philippine inflation. Geopolitical concerns might keep volatility elevated,” Mr. Dumalagan added.
Eyes are on the trade talks between the United States and China which started last week, following a tariff war on imports slapped on incoming products.