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Peso to move sideways vs dollar on soft US jobs data, trade issues

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THE PESO is seen to move sideways against the dollar this week following weaker-than-expected jobs data in the United States as well as positive developments in Washington’s trade issues.

The local unit closed last week at P52.04 versus the greenback, 30 centavos weaker than Thursday’s P51.74-per-dollar finish.

Week on week, however, the peso still strengthened from its P52.16-per-dollar close last May 31.

“On Monday, the greenback is expected to temporarily depreciate after US non-farm payrolls for May 2019 came in weak,” a market analyst said in an e-mail yesterday.

“This report is expected to fuel speculations of at most three rate cuts from the US this year,” the analyst said.

US job growth slowed sharply in May and wages rose less than expected, raising fears that a loss of momentum in economic activity could be spreading to the labor market, which could put pressure on the Federal Reserve to cut interest rates this year.




Nonfarm payrolls increased by 75,000 jobs last month, the US Labor Department said. It was the second time this year that job gains dropped below 100,000. Job growth in March and April was revised down by 75,000.

Rizal Commercial Banking Corp. economist Michael L. Ricafort said there is a good chance for the peso to “remain relatively stronger” this week due to the continued decline in US Treasury yields.

“(The peso) could possibly trade back below P52-per-dollar levels…amid weaker US dollar vs. major global/Asian currencies amid renewed declines in US government bond yields, with the US 10-year tenor among 20-month lows at 2.08%, which reduces the allure of the US dollar,” Mr. Ricafort said in a text message Sunday.

He added that the local unit may strengthen after US President Donald J. Trump suspended the planned tariffs on Mexican imports, which was initially intended to curb illegal immigration in the US’ southern border.

Meanwhile, the peso might trim some of its gains midweek amid expectations of firm US inflation reports for May 2019.

“US core producer price inflation is seen to improve to 2.5% year-on-year from 2.4% in April 2019. US core consumer price inflation, meanwhile, might remain steady at 2.1%, above the 2% target of the US central bank,” the market watcher said, adding that these economic data might temper expectations of aggressive policy easing by the US Federal Reserve this year.

Towards the end of the week, the peso is seen to recover, brought by increase in risk appetite driven by bets of stronger Chinese economic data on industrial production and retail sales.

For this week, Mr. Ricafort expects the peso to trade between P51.80 and P52.20, while the market analyst gave a P51.50-P52.30 range.

“The peso is expected to move sideways this week with the lack of solid leads,” said UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion, giving a P51.70-P52 forecast range for the week.

Financial markets will be closed on June 12 for Independence Day. — Karl Angelo N. Vidal with Reuters

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