THE PESO is seen to trade sideways this week as weaker-than-expected US inflation data keep the market doubtful of a Federal Reserve rate hike for now, but will be offset by safe-haven buying amid rising North Korea tensions.
The peso on Friday rebounded to P51.39 versus the greenback due to profit taking after touching its year-to-date low of P51.61 per dollar that day.
Week-on-week, it slid 24 centavos from the P51.15 recorded on Oct. 6.
Analysts said the local currency may appreciate at the start of the week following weaker-than-expected US consumer price index (CPI) data, signalling that a December Fed policy tightening is not yet a done deal.
This comes after Fed officials held lengthy debates on the cloudy path of inflation, as shown in the minutes of its Sept. 19-20 meeting released last week.
“I think the market will move dollar down if it’s not as significant as they thought,” a trader said in a phone interview on Friday.
However, Land Bank of the Philippines market economist Guian Angelo S. Dumalagan said this will likely be offset by hawkish Fed talk this week.
“After likely depreciating on Monday due to weaker-than-expected US inflation data, the dollar might recover afterwards, as Fed chair Janet L. Yellen, [Minneapolis Fed President Neel] Kashkari and [“New York Fed President William] Dudley might continue to deliver comments that keep open the chances of another US rate hike in December 2017,” Mr. Dumalagan said in an e-mail.
“Upbeat US reports on retail sales and consumer sentiment might also provide support to the dollar, despite geopolitical noise involving Iran’s nuclear deal,” added Mr. Dumalagan.
He also noted that the sideways trend will continue until the end of the week, following likely soft US housing data, that might be offset by safe-haven buying amid potentially weak China economic data.
“Chinese economic signals, however, might not be straightforward given that Chinese reports on retail sales and industrial production are expected to show stronger readings,” noted Mr. Dumalagan.
Another trader said the market will look out for the exchange rate’s possible break over the P51.61 resistance level, which could propel it to a higher range.
“Dollar-peso feels like we’ll probably see the it trading within range, But if it breaks resistance, then definitely the range will shift upwards. We’ll see if well see a break [this week],” he said.
Other developments that the market will watch out for include US tax reform progress as well as geopolitical tension involving the US, North Korea, and Iran.
Mr. Dumalagan forecasts a P51.20 to P51.50 per dollar range for this week, while traders see the peso playing between P51.30 and P51.60 versus the greenback. — E.J.C. Tubayan