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Peso may strengthen on trade data, BSP decision

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THE PESO may strengthen this week as the market awaits the release of local trade data as well as the possibility of a final round of easing at the central bank’s last policy meeting for this year, which happens this week.

The local unit closed at P50.765 against the greenback on Friday, gaining 3.5 centavos from the P50.80 per dollar finish on Thursday, according to data from the Bankers Association of the Philippines.

Week-on-week, it strengthened by 4.5 centavos against its 50.81-a-dollar close on Nov. 29.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael L. Ricafort noted that Friday’s close was the local unit’s strongest in more than a week and also among its best showing in 22 months.

“The peso closed stronger…after the US dollar corrected lower versus major global currencies recently after improved global risk appetite amid renewed optimism about a partial phase one US-China trade deal,” Mr. Ricafort said in a text message on Friday.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a text message that the peso moved “sideways with the market waiting for major factors.”

Reuters reported on Friday the White House’s National Economic Council Director Larry Kudlow said the Dec. 15 deadline for a new round of US tariffs on a set of Chinese consumer goods is still on the table.

However, Mr. Kudlow said that President Donald J. Trump likes the current progress of their trade talks with China.

“There’s no arbitrary deadline here … but that fact remains Dec. 15 is a very important date with respect to a no-go or go-on tariffs,” Mr. Kudlow told CNBC as reported by Reuters.

Meanwhile, China has also said on Friday that it will waive import tariffs for some US products such as soybeans and pork shipments, which implied a more positive tone in the financial market sentiment regarding the trade talks.

For this week, analysts said factors that may affect trading will include local data as well as the eighth and last policy meeting of the central bank’s Monetary Board for 2019.

“[This] week may provide significant movement as major trade data comes out,” Mr. Asuncion said.

“The markets will anticipate the next BSP (Bangko Sentral ng Pilipinas) monetary policy-setting meeting on Dec. 12 for a possible cut in local policy rates that cannot be completely ruled out amid relatively low inflation that is still well below the 2-4% target,” Mr. Ricafort said.

Latest data from the Philippine Statistics Authority showed the country’s September trade gap plummeted from a year ago as a bigger decline in merchandise imports tempered the impact of the first drop in six months for foreign sales of Philippine goods.

Merchandise exports slipped by 2.6% to $5.898 billion in September — the first time in six months that sales abroad of local goods declined — while imports dropped for the sixth month in a row by 10.5% to $9.017 billion.

That made the trade deficit narrow by 22.5% to $3.119 billion in September.

The PSA is set to release latest trade deficit data on Dec. 10.

Meanwhile, the Monetary Board will have its last meeting for 2019 on Dec. 12, where they will decide if they will implement another rate cut or hold policy rates.

“BSP’s Monetary Board will consider new data and potential risks at its meeting next week on Dec. 12, 2019,” BSP Governor Benjamin E. Diokno said in a tweet after the PSA reported that November inflation picked up to 1.3% from 0.8% in October.

Mr. Ricafort sees the peso moving within 50.55-50.95 this week, while UnionBank’s Mr. Asuncion thinks the peso will fare around the P50.60-50.90 band. — L.W.T. Noble with Reuters





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