THE PESO is expected to rise this week on the back of the strong support from the surge of remittance flows this holiday season.
The local unit closed at P50.815 against the greenback last Friday, depreciating by 18 centavos from its P50.635 finish on Thursday, according to data from the Bankers Association of the Philippines.
The peso also weakened by 17.5 centavos from its close of P50.64 to a dollar a week earlier.
Dollars traded dropped to $835.75 million from $998.7 million on Thursday.
Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort attributed the peso’s performance to US data released last week.
“Stronger US initial jobless claims data also supported the latest gains in the dollar,” he said in a text message.
The number of Americans who filed for unemployment benefits slipped from more than a two-year high last week on labor market strength, Reuters reported.
Data from the US Labor department released on Thursday showed that initial claims for state unemployment benefits went down by 18,000 to a seasonally adjusted 234,000 for the week.
Reuters said although the drop did not unwind the jump by 49,000 seen last week, it likely does not indicate material shift in the labor market conditions as claims data tend to be volatile in the period after Thanksgiving.
Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion blamed the peso’s decline on “global headwinds.”
“The market is cautious going into the holiday break with global headwinds like the impeachment of US President Donald Trump as potentially the main driver,” he said in a text message.
Reuters reported that after US Speaker Nancy Pelosi said she would not submit the impeachment case to the Senate until they have established how Republicans will manage the proceedings, Mr. Trump tweeted that he preferred an immediate trial.
“So after the Democrats gave me no due Process in the House, no lawyers, no witnesses, no nothing, they now want to tell the Senate how to run their trial,” he said on Twitter. “I want an immediate trial.”
The US House of Representatives approved last Wednesday two articles of impeachment against Mr. Trump. A trial next month to decide whether he will be convicted and removed from office is expected at the Senate, which is considered to be a “friendlier terrain” for the US president.
A major factor this week that could affect trading given the holiday season is the surge of remittances, according to RCBC’s Mr. Ricafort.
“The financial markets will be anticipating the surge in the conversion of OFW (Overseas Filipino Workers) remittances for Christmas holiday-related spending and also in preparation for the New Year holiday-related spending….,” he said.
Data from the Bangko Sentral ng Pilipinas (BSP) showed remittances hit a record high of $2.849 billion last December 2018.
“Since 2014, the trend of monthly cash remittances is upward, with notable peaks observed during the holiday (November-December) and enrolment seasons (April-June),” the BSP earlier said.
Latest data from the central bank showed cash remittances inched up by eight percent to $2.671 billion in October.
By type of worker, cash sent home by land-based workers increased by 3.8% to $19.436 billion year-to-date, while those sent home by those at sea increased by 7.5%to $5.422 billion, the central bank said in a news release.
Meanwhile, UnionBank’s Mr. Asuncion said the “market may move sideways during the holidays.”
For this week, RCBC’s Mr. Ricafort sees the peso playing around the P50.40-50.90 level, while UnionBank’s Mr. Asuncion expects the local unit to range from P50.60-50.90 versus the dollar. — L.W.T. Noble