THE PESO is seen to weaken this week as the dollar strengthens on the back of generally upbeat US economic data as well as expected hints from Federal Reserve officials on future rate hikes.
The local currency closed at P52 per dollar last Thursday, 12 centavos stronger than the P52.12 logged the previous day, as market players took profits ahead of the Chinese New Year holiday.
Week on week, the peso ended weaker than its P51.48-a-dollar finish last Feb. 9.
Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (Landbank), said the dollar is expected to remain strong this week on the back of “generally upbeat US economic reports and possibly more hawkish hints from the US Federal Reserve.”
On Friday, the US Commerce Department said new homes to be constructed rose by 9.7% in January to a seasonally adjusted annual rate of 1.326 million units. This figure was the highest level in more than a year or since October 2016.
Building permits also climbed 7.4% to a rate of 1.396 million housing units.
On the other hand, US consumer sentiment rose to 99.9 in February, higher than the 95.7 reading a month ago as well as the 95.5 consensus among Reuters economists.
These data, Mr. Dumalagan said, will give the dollar a boost in the first three days of the week, although noting that this may be tempered by caution ahead of the Fed meeting minutes which will be released on Thursday.
However, a trader said in a phone interview that the remittances which piled up over the long weekend will give the local currency some boost.
“We have a long weekend so expect a lot of remittances to come in. We might see an early selling come Monday,” the trader said.
Meanwhile, Mr. Dumalagan said the peso-dollar pair may experience some volatility in the last trading days of the week, even as movements may still be favoring a stronger greenback.
“Hawkish hints from the US monetary policy meeting minutes and possible affirmations of more US interest rate hikes this year from some policy makers may continue to keep the dollar strong, despite possibly mixed US economic data on manufacturing, services, and existing home sales,” he said, adding that the “likely firm” inflation data from Japan as well as manufacturing and services data from the Eurozone may drive the focus out of US.
“[These data] may introduce volatility by potentially diverting some focus on the future policy actions of these two major economies. A weaker dollar against the yen and the euro sometimes translates to a stronger peso.”
For this week, the trader sees the peso moving between P51.90 and P52.30 versus the dollar, while another trader gave a slimmer range of P51.90-P52.15.
Landbank’s Mr. Dumalagan meanwhile said the peso-dollar rate would range P51.60 to P52.50, adding that the factors which could reverse the dollar’s forecasted upward bias include unexpected dovish tone from the Fed meeting minutes and from the policy makers, as well as weaker-than expected US economic reports.
“Domestically, positive updates on the government’s key projects and programs may also help control the dollar’s strength against the local currency,” he added. — Karl Angelo N. Vidal