THE PESO is expected to strengthen slightly against the dollar this week as it will likely sustain the upward trajectory seen last Friday following the pronouncements of the Bangko Sentral ng Pilipinas (BSP).
On Friday, the local unit ended the week at P52.32 against the greenback, up one percent or 52 centavos from Thursday’s P52.84 finish, boosted by the decision of the BSP to keep both interest rates and bank reserve levels steady.
Week-on-week, the peso strengthened from the P52.65-per-dollar finish last March 15.
A foreign exchange trader said the peso will “likely sustain” its strength versus the dollar after the BSP kept borrowing costs steady during its meeting on Thursday.
BSP Governor Benjamin E. Diokno said the decision of the Monetary Board to keep interest rates at bay is “based on its assessment that prevailing monetary policy settings remain appropriate.”
The reserve requirement ratio (RRR) was also left untouched at 18%, with policy makers keeping a close eye on its effects.
“For next week, the peso strength will likely be sustained, especially with the weak dollar…” the trader said on Friday.
Meanwhile, a market analyst said the dollar is expected to “remain at least flat” on Monday on the back of concerns on slowing growth in Germany amid mixed US data on existing homes sales, manufacturing, and services.
“German manufacturing activity showed a sharper contraction in March 2019, increasing worries on decelerating growth in the currency bloc and amplifying risk aversion in the market due to Brexit uncertainties,” the analyst said in an e-mail on Sunday.
The market watcher added that news about another round of US-China trade talks in Beijing this week “may also help temper” the pessimism in the market.
US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will head to Beijing on Thursday for another round of trade talks between China and the US. Mr. Lighthizer said the trade negotiations had made some progress, although he noted that there were “few hurdles” remaining.
Toward the end of the week, the greenback is seen to dip anew due to likely dovish speeches from various US Federal Reserve (Fed) officials, before recovering on Friday amid bets of an upward revision in the fourth quarter US GDP growth.
Last week, the US central bank said there will be no interest rate hikes this year amid an economic slowdown, a departure from its previous pronouncements that it will raise benchmark rates thrice this year.
For this week, the trader expects the peso to move between P52.10 and P52.35, while the market analyst gave a wider P51.90-P52.70 range.
Meanwhile, Security Bank Corp. chief economist Robert Dan J. Roces projected the peso to end the first quarter at P53 against the dollar amid “risk-off sentiment.”
“We’re seeing risk-off sentiment. We’re seeing this all around. US-China trade war, very dovish Fed again, those are the factors,” Mr. Roces said on the sidelines of Security Bank’s economic forum in Mandaluyong City on Thursday. — Karl Angelo N. Vidal