THE PESO is seen to strengthen against the dollar this week as market players expect the US Federal Reserve to keep its benchmark rates unchanged.
The local unit ended last week at P52.535 versus the greenback, recovering from the P52.86-per-dollar finish on Thursday. Week on week, however, the peso weakened slightly from its P52.515 finish last Jan. 18
A market analyst said in an e-mail that the dollar is expected to weaken against the peso ahead of the first Fed policy meeting this year amid growing expectations of dovish hints from the central bank in response to signs of slowing growth.
“In the first three days of the week, the greenback is expected to weaken, as investors anticipate some dovish guidance from the US Federal Reserve during its January 2019 meeting,” the analyst said.
“While the US Federal Reserve is expected to keep its policy rates unchanged and perhaps maintain its view of two more rate hikes this year, it may increasingly open the possibility of a temporary pause in its rate tightening,” the analyst added.
Meanwhile, Rizal Commercial Banking Corp. economist Michael L. Ricafort said signals from US Commerce Secretary Wilbur Ross indicating the US-China trade talks may still be far from resolution “weighed on the US dollar vs. major currencies.”
US and Chinese officials are set to meet in Washington for another round of trade talks, with a month remaining before their truce expire.
“[However], this could be partially offset by the three-week reopening of the US government shutdown,” Mr. Ricafort added.
He also noted that continued net foreign portfolio inflows as well as expectations of lower inflation rate in the coming months would also support the peso, or at least limit any peso weakness this week.
For this week, Mr. Ricafort expects the peso to trade between P52.30 and P52.60, while the analyst gave a wider range of P52.10-P52.80. — Karl Angelo N. Vidal