THE PESO will likely weaken against the dollar this week as investors are seen to shift their attention to the upbeat economic fundamentals of the United States amid easing geopolitical tensions abroad.
The local unit slipped on Friday to close at P52.55 against the greenback, moving sideways from its P52.52-per-dollar finish on Thursday.
However, the peso strengthened from its P52.70-per-dollar finish on May 25, which was its weakest in nearly 12 years.
Over the weekend, Land Bank of the Philippines (LANDBANK) market economist Guian Angelo S. Dumalagan said the dollar might strengthen this week on the back of better-than-expected US economic reports.
“US non-farm payrolls for May 2018 exceeded estimates by a huge margin, while unemployment rate for the same month improved further to 3.8%, the lowest level since April 2000,” Mr. Dumalagan said in an e-mail on Saturday.
The US economy continue to add more jobs last month, with non-farm payrolls reaching 223,000. The May figure was better than the 188,000 additional jobs expected by the market.
“These reports were accompanied by an acceleration in US average hourly earnings and manufacturing activity,” Mr. Dumalagan added.
The hawkish effects of the strong economic data in the US might be more pronounced as easing geopolitical tensions abroad eased after US President Donald J. Trump told reporters that the planned summit with North Korean leader Kim Jong-un will push through on June 12 in Singapore.
“I think it’s probably going to be a very successful, ultimately a successful process,” Mr. Trump said on the White House lawn, Reuters reported.
Meanwhile, Italians assembled a new government as Giuseppe Conte was sworn in on Friday as the prime minister of an anti-establishment government.
The relaxed political tensions abroad “may divert the spotlight to next week’s US monetary policy meeting, during which US policy makers are widely expected to hike rates again by another 25 basis points,” Mr. Dumalagan said.
After a strong start, the greenback may shed some of its gain on Tuesday, he added, as speculations of another rate hike from the Bangko Sentral ng Pilipinas could increase amid expectations of an uptick in inflation last month.
Inflation likely picked up to 4.9% in May from the 4.5% print the previous month as well as the 2.9% reading in May last year, according to a BusinessWorld poll of 10 economists.
“Towards the end of the week, the dollar may move sideways with an upward bias amid likely firm US non-manufacturing data and mixed [gross domestic product] reports from Japan and the Eurozone,” LANDBANK’s market economist noted.
For this week, Mr. Dumalagan sees the peso to move between P52.30 and P52.80 versus the dollar.
Likewise, a foreign exchange trader said the peso will trade within a “wide” range of P52.30-P52.70, due to the political concerns overseas.
“The trend is still for a higher dollar-peso, although we’re getting huge swings due to the volatility of the global market brought about by the political situations,” the trader said on Friday. — Karl Angelo N. Vidal