Peso may drop amid rising oil prices, hike bets
THE PESO may weaken anew this week as oil prices continued to increase due to the Russia-Ukraine war and amid hawkish signals from the US Federal Reserve.
The local unit closed at P52.15 per dollar on Friday, stronger by 18 centavos from its P52.33 finish on Thursday, based on data from the Bankers Association of the Philippines.
It also appreciated by 18.5 centavos from its P52.335-per-dollar close a week earlier.
The peso opened Friday’s session at P52.305 a dollar, which was also its worst showing. Meanwhile, its intraday best was at P52.12.
Dollars traded increased to $1.105 billion on Friday from $960.95 million on Thursday.
The peso appreciated on Friday following upbeat US jobless claims data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Data released by the US Labor department on Thursday showed initial claims for unemployment benefits declined by 28,000 to a seasonally adjusted 187,000 for the week ended March 19, which is the lowest level since September 1969, Reuters reported.
Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the market also factored in the latest policy decision of the Bangko Sentral ng Pilipinas (BSP).
The BSP Monetary Board kept rates steady on Thursday, as expected by the market, although it now expects faster inflation as the Russia-Ukraine war continues to cause the surge in oil and commodity prices.
The central bank now expects inflation to breach their 2-4% target at 4.3% this year from 3.7%, previously. Inflation next year is estimated to rise by 3.6% from 3.3%
For this week, Mr. Asuncion said market participants will consider the hike in global oil prices and Fed’s hawkish signals.
Brent crude and West Texas Intermediate crude prices rose by 11.5% and 8.8% from a week earlier. Oil prices increased by more than 1% on Friday after a missile attack on an oil distribution site in Saudi Arabia.
US Fed Chairman Jerome H. Powell last week said the US central bank should “expeditiously” raise rates to prevent high inflation from becoming entrenched. Analysts said the strong jobs data could back this stance.
Meanwhile, Mr. Ricafort said the peso-dollar movement may also reflect market sentiment on manufacturing activity and the announcement of the pandemic measures for next month.
The March Philippine purchasing managers index will be reported by IHS Markit on Friday, April 1.
Meanwhile, some stakeholders have floated the idea of further easing pandemic restrictions to Alert Level 0, although the Department of Health said current pandemic restrictions may likely be kept until the end of President Rodrigo R. Duterte’s term.
For this week, Mr. Asuncion gave a forecast range of P52.25 to P52.50 per dollar, while Mr. Ricafort expects the local unit to move within P52 to P52.40. — Luz Wendy T. Noble with Reuters
