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Peso to rise further on dovish Fed

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The peso may climb this week as the dollar remains weak.

THE PESO may strengthen further this week as the dollar will likely remain weak due to recent dovish signals from the US Federal Reserve.

The local currency sustained its rally on Friday, closing the week at P52.14 per dollar amid risk-on sentiment among market players in favor of emerging market currencies.

Traders interviewed before the weekend said a stronger peso can still be expected this week, buoyed by sustained broad dollar weakness.

“[We’re expecting] stronger peso mainly because dollar has been weakening across,” a trader said.

Another trader said the peso will “track the general direction of the dollar” as investors continue to price in dovish comments from the US central bank.

Fed Chair Jerome H. Powell said on Thursday that the monetary authority can afford to “be patient” on its path towards higher interest rates, adding that policy makers are not looking at a “pre-set path” for key rates for this year.




“The US dollar recently declined versus major global and emerging market currencies amid consistent dovish signals from Federal Reserve Chairman Powell, Fed minutes, as well as from other Fed officials, all signalling a possible pause on Fed rate hikes,” Michael L. Ricafort, economist at Rizal Commercial Banking Corp., said in a text message on Sunday.

He added that the continued partial shutdown of the US government since Dec. 21 “also led to weaker US dollar versus major global currencies.”

“The peso could still strengthen amid continued net foreign portfolio/hot money inflows into the country since the start of the year,” Mr. Ricafort noted.

Another trader said the US inflation data “will dictate” the performance of the peso for the first few days of the week. Reuters reported that US consumer prices declined for the first time in nine months in December as gasoline prices plunged amid pressures from steady increases in rental housing and healthcare costs.

For this week, Mr. Ricafort expects the peso to trade between P51.90 and P52.20, while the first trader gave a P52-P52.40 range. The second trader, on the other hand, projected a P52-P52.30 band. — Karl Angelo N. Vidal