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Peso likely to climb on US data, Fed minutes

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THE PESO is seen to strengthen against the dollar this week following the release of weak US data before the weekend as well as the anticipated dovish signals from the US Federal Reserve.

The local unit ended last week at P52.43, down five centavos from its previous close, as market players pushed the greenback higher despite disappointing US retail sales data.

Week on week, the peso also declined from the P52.07-per-dollar finish last Feb. 8.

Today, the peso will likely strengthen versus the dollar following last Friday’s weaker-than-expected industrial production data, a market analyst said in an e-mail.

US factory production tightened unexpectedly last month, declining by 0.9% from a 0.8% increase in December, dragged by an 8.8% decline in motor vehicles and parts.

“Such report supported [San Francisco Fed chair Mary] Daly’s comment about the possibility of keeping interest rates steady this year amid slowing growth and muted inflation,” the analyst said.




However, the dollar’s decline may be tempered by safe-haven demand on speculations that the European Central Bank may introduce a new long-term refinancing operation in response to slowing growth in the economic bloc.

“After moving sideways in the next two days, the greenback is expected to weaken anew starting Thursday, weighed down by possible dovish comments from the minutes of the January 2019 US policy meeting,” the analyst added.

The Fed kept its borrowing costs steady during its Jan. 29-30 meeting, keeping the federal funds rate between 2.25% and 2.5%.

The central bank said it will be “patient” as it will assess “realized and expected economic conditions” in relation to its 2% inflation target.

“The said report might further bolster views of steady US policy rates this year,” the trader added.

Meanwhile, Rizal Commercial Banking Corp. economist Michael L. Ricafort said market players will price in “signs of US or global economic slowdowns” which could translate to slower growth and trade in the emerging markets amid “lack of progress” in the US-China trade negotiations.

Both Beijing and Washington reported progress during its trade talks in the Chinese capital last week ahead of the March 1 deadline of its 90-day truce. However, the White House noted that much work needs to be done to persuade China to change its trade behavior.

The market analyst noted that the trade talks between the two countries may “introduce some volatility” to the market.

For this week, Mr. Ricafort expects the peso to trade between P52.30 and P52.60 versus the dollar, while the analyst gave a wider P52-P52.60 forecast range. — Karl Angelo N. Vidal