THE PESO will likely strengthen against the dollar this week, as market players await the trade meeting between the United States and China.
On Friday, the local unit strengthened further versus the greenback to hit a one-year high, closing the session at P51.57 per dollar.
Week on week, the peso also strengthened from the P52.02-per-dollar finish last June 14.
“The peso could continue to be relatively stronger in the coming week and would partly take cue on the G-20 meeting of US President (Donald J.) Trump and China President Xi (Jinping),” said Rizal Commercial Banking Corp. economist Michael L. Ricafort in a text message.
Mr. Trump confirmed last week he will meet with his Chinese counterpart on the sidelines of the G-20 Summit in Osaka, Japan on June 28-29.
The meeting of the two leaders raises hope both countries will reach a truce after their relations recently soured again after they imposed tit-for-tat tariffs against each other’s imports.
“Trump signalled willingness to agree on a trade deal with China but also ready to expand by at least $300 billion US imports from China with higher tariffs of 25% and even sharply raise tariffs further in case China is not interested to…deal,” Mr. Ricafort said.
He added that the decision of the Bangko Sentral ng Pilipinas (BSP) to keep interest rates steady will likely support the peso.
“[N]o cut in local policy rates tends to make peso interest rate returns higher from the point of view of international investors, especially amid more dovish Federal Reserve… and lower benchmark bond yields in the US and other developed countries.”
The BSP left rates untouched during its Thursday meeting. BSP Governor Benjamin E. Diokno said the “prudent pause” in trimming rates allows them to assess the effects of prior adjustments such as the reduction in banks’ reserve requirement ratios.
For this week, Mr. Ricafort expects the peso to trade between P51.20 and P51.70, while a foreign exchange trade gave a P51.30-P51.60 range for today.
“We’re still seeing recovery in the dollar slightly, but on the technical side, we still expect the dollar to depreciate,” the trader said in a phone interview on Friday. — Karl Angelo N. Vidal