THE PESO is expected to be broadly steady this week ahead of the policy meetings of the local and US central banks and as global crude oil prices stay within four-month lows despite growing tensions in the Middle East.
On Friday, the local currency weakened to close the week at P52.02 against the greenback from the previous day’s finish of P51.865 per dollar due to tensions between the United States and Iran.
Week-on-week, the peso was slightly stronger than its P52.04-per-dollar finish on June 7.
Michael L. Ricafort, economist at Rizal Commercial Banking Corp. (RCBC) said in a text message that the peso will likely “remain relatively stable in the coming week…as global crude oil prices lingered among four-month lows despite attacks on two tankers in the Gulf of Oman earlier last week.”
Escalating tension in the Middle East is driving up oil prices, a huge import cost for many economies, putting more strain on global growth already hurt by the trade war being waged by US President Donald Trump and weakening consumer confidence.
Crude oil prices spiked more than 4% after two oil tankers were attacked in the Gulf of Oman on Thursday, just a month after strikes on tankers in the United Arab Emirates and oil-pumping stations in Saudi Arabia.
Mr. Ricafort said the recent decline in US Treasury yields will also continue to support the peso.
“Market expectations recently about possible cut in US key short-term interest rates (fed fund rates) in 2019 have also supported the peso. The markets are also anticipating the upcoming local monetary policy-setting meeting on Thursday,” Mr. Ricafort added.
The US Federal Reserve’s Federal Open Market Committee’s policy meeting is scheduled on June 18-19. The Bangko Sentral ng Pilipinas’ (BSP) policy-setting Monetary Board will also hold its own review on June 20.
Another trader said in an email that dovish cues from the Fed and BSP may also lend some strength to the peso.
“The dollar is expected to move with a downward bias this week as the US Federal Reserve might provide more concrete hints of a possible rate cut this year amid signs of slowing growth and muted inflation. The greenback’s downtrend, however, might be tempered by similar dovish cues from the BSP,” the trader said.
The trader said in the first three days of the week, the dollar may move sideways ahead of the Fed’s and Bank of Japan’s policy meetings.
Meanwhile, the peso could gain strength versus the greenback toward the end of the week as the US central bank wraps up its policy-setting meeting as the market expects “a U-turn” in its stance. — RJNI