By Karl Angelo N. Vidal
THE PESO is seen to regain its strength against the US dollar this week, as solid fourth quarter Philippine economic growth, and the continued US government shutdown, will likely temper the greenback’s rise.
On Friday, the local currency strengthened against the greenback as it gained eight centavos to close at P50.72-per-dollar. This was attributed to the US currency’s weakness due to weak housing data and worries over the US government shutdown.
“After unexpectedly rising last week amid soft domestic reports and US rate hike expectations, the dollar might show a downward bias this week due to likely firm Philippine GDP (gross domestic product) data,” Guian Angelo S. Dumalagan of Landbank said in an e-mail on Saturday.
The Philippine Statistics Authority (PSA) is scheduled to report fourth-quarter GDP data on Jan. 23.
Multinational lenders such as the World Bank and Asian Development Bank expect the Philippine economy to have grown by 6.7% in 2017, well within the 6.5-7.5% target set by the government.
“The potentially upbeat growth report could divert investors’ attention to the country’s sound prospects this year,” Mr. Dumalagan said, adding that the upward revision of the country’s third-quarter GDP growth as well as weaker-than-expected reading on US consumer sentiment may further strengthen the local currency.
The PSA reported GDP expanded by 7% in the third quarter of 2017, slightly higher than the 6.9% initially. The slightly upgraded July-September estimate kept the average of 2017’s first three quarters at 6.7%.
Meanwhile, Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, said the US government shutdown will be unpleasant for the greenback.
“It definitely doesn’t look good for the US dollar. The shutdown communicates that US policy makers need to get their act together seriously,” Mr. Asuncion said in a text message on Sunday.
On Saturday, the US government shut down as Republican legislators failed to secure enough votes to pass a short-term expenditure bill, forcing some government services to be halted. This was the first US government shutdown in four years.
“The greenback’s decline may persist until the last day of the week, especially since US reports on existing home sales, services and manufacturing are generally expected to show weaker readings,”
Mr. Dumalagan added.
The likely hawkish tone of the European Central Bank meeting may provide some boost to a basket of currencies including the peso, he noted.
For this week, Mr. Dumalagan sees the peso moving between P50.30 and P51, while Mr. Asuncion gave a slimmer range of P50.50 to P50.90.