THE PESO is expected to further strengthen this week as more remittances come in, with the Christmas season coming closer.

The local unit finished trading at P50.64 against the greenback on Friday, strengthening by 7.1 centavos from its 50.711 close on Thursday, according to data from the Bankers Association of the Philippines.

Week on week, it strengthened by 12.5 centavos from its P50.765 close on Dec. 6.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort and a trader said the trade negotiations between the United States and China were the major factors behind the local unit’s climb on Friday.

“The peso strengthened when the market took in the news that [US President Donald J.] Trump has finally done an in principle phase one deal with their counterpart even after the mixed signals before that,” a trader said in a phone call.

“The peso closed stronger after US President Trump signed off the phase one US-China trade deal…thereby improving global market risk appetite especially on some emerging market stock markets and currency markets, such as the peso,” Mr. Ricafort said in a text message.

Reuters reported that a source knowledgeable about the bilateral negotiations of the US and China said the former will suspend tariffs on $160 billion worth of Chinese goods expected to take effect by Sunday and roll back existing tariffs.

Additionally, the source said Beijing accepted purchasing $50 billion worth of agricultural goods from the US in 2020 which is twice what it bought in 2017 when the trade war has yet to explode.

Two people familiar with the negotiations had said earlier on Thursday that Washington offered to cut existing tariffs on Chinese goods by as much as 50% and suspend the new tariffs scheduled for Sunday in order to secure a “Phase 1” deal first promised in October.

For this week, the trader said the market will be anticipating key local data which could guide currency trading.

“This week, we’ll be on the lookout for the release of remittance and hot money data,” the trader said.

Meanwhile, Mr. Ricafort thinks the continued influx of remittance from overseas Filipino workers (OFW) amid the upcoming holidays will also affect peso trading.

“One of the most important catalysts next week remains to be the seasonal spike in OFW remittances and conversion to pesos to finance Christmas holiday-related spending that could culminate especially within a week before Christmas,” he said.

The Bangko Sentral ng Pilipinas (BSP) is set to release October remittances data today while the report on foreign portfolio investments in November will be out on Thursday.

Central bank data showed foreign portfolio investments saw a net inflow of $104.53 million in October, reversing the $231.71 million net outflow in September as well as the net $67.83 million that left the country in October last year.

Meanwhile, cash remittances jumped to $2.379 billion in September, 6.24% higher than the $2.237 billion in the same month a year ago

The trader expects the peso to trade at a range of P50.25-50.70, while Mr. Ricafort forecasts the exchange rate to end around the P50.30-50.80 level. — L.W.T. Noble with Reuters

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