Peso may weaken vs dollar on Fed meeting, budget balance data

THE PESO could weaken versus the dollar this week as the market awaits the release of the government’s latest budget balance data and the US central bank’s rate decision.

The local unit closed at P48.381 per dollar on Friday, appreciating by 2.9 centavos from its P48.41 finish on Thursday, based on data from the Bankers Association of the Philippines.

Meanwhile, it barely moved from its P48.38 finish a week earlier.

The peso strengthened against the greenback last week after the government closed its offering of euro-denominated bonds, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The Bureau of the Treasury last week raised €2.1 billion in fresh funds via euro-denominated bonds with tenors of four years, 12 years, and 20 years.

Another factor that contributed to the peso’s strength was the decline in US Treasury yields, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.

For this week, Mr. Asuncion said the market will take its cue from the US Federal Reserve’s monetary policy decision at its meeting on April 27-28. 

Fed Chair Jerome Powell has primed investors to fear no surprises from the central bank’s two-day meeting ending Wednesday, when officials are expected to keep interest rates near zero and signal no change in their $120-billion-a-month pace of bond purchases, Bloomberg reported

Mr. Powell, who will hold a press conference after the decision, has balanced optimism by warning the economy remains at risk from the coronavirus disease 2019 (COVID-19) globally. Officials in March signaled they expect to hold rates steady through 2023.

Meanwhile, Mr. Ricafort said investors will also watch out for the March budget balance data, which the Bureau of the Treasury is scheduled to report on Tuesday.

The government’s budget deficit more than tripled to P116 billion in February from a P37.6-billion fiscal gap a year earlier, as the surge in spending outpaced the uptick in revenues.

For this week, Mr. Ricafort gave a forecast range of P48.25 to P48.55 per dollar while Mr. Asuncion expects the local unit to move within the P48.20 to P48.50 band. — L.W.T. Noble with Bloomberg