THE PESO is seen to strengthen against the dollar this week as market players expect the local central bank to keep its policy rates steady during its Dec. 13 policy meeting — the last for the year.
The peso ended last week a tad stronger versus the greenback at P52.71 from the P52.76 finish last Thursday on the back of weak jobs data in the US as well as lower global oil prices.
However, the local unit weakened week-on-week from the P52.45-per-dollar finish last Nov. 29.
A market analyst said the dollar might depreciate this week amid mixed US economic reports, dovish views on the US Federal Reserve’s policy tightening as well as hawkish hints from the local and European central bank.
“On Monday, the greenback may shed some of its strength after [St. Louis Fed President James] Bullard suggested a pause in the US central bank’s rate adjustments this month,” the analyst said in an e-mail.
This “dovish” comment reinforced the recent statement of Fed Chair Jerome Powell that the federal funds rate is nearing neutral levels, which tempered views of aggressive policy tightening in the future.
The analyst added the weaker-than-expected US non-farm payrolls, which came in at 155,000 jobs versus the 198,000 estimated jobs, may also weigh down on the dollar.
Despite this, Rizal Commercial Banking Corp. economist Michael L. Ricafort said the peso could slightly weaken today following the recent Organization of the Petroleum Exporting Countries (OPEC) agreement to cut oil production.
On Saturday, the OPEC as well its allies decided to cut oil production by 1.2 million barrels per day.
“Though already factored in by the market, OPEC oil production cuts could lead to some upward correction in global oil prices, at the very least, that may also lead to some slight and healthy upward correction in the dollar-peso,” Mr. Ricafort added in a text message.
After likely moving sideways on Tuesday and Wednesday, the analyst projected that the dollar may continue to weaken further amid more “optimistic” tone from the Bangko Sentral ng Pilipinas (BSP) during the Dec. 13 meeting.
“[The BSP] may sound more optimistic this month amid signs of easing price pressures following the weaker-than-expected local inflation report for November 2018.”
In a BusinessWorld poll conducted last week, 11 out of 12 economists expect the monetary authority to hold off its policy tightening amid signs of slowing inflation evidenced by the November print.
Last month, prices of widely used goods and services rose 6%, slower than the nine-year high of 6.7% tallied in October and September, driven by slower price increases in food and non-alcoholic beverages.
The central bank has raised its interest rates by a cumulative 175 basis points since May, with the latest tightening last month, to arrest inflation and price expectations.
For this week, the analyst expects the peso to trade between P52.20 and P52.80, while Mr. Ricafort gave a P52.50-P52.80 range. — Karl Angelo N. Vidal

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