THE PESO will likely strengthen against the dollar this week following the slower domestic inflation print in June.
The local unit closed Friday’s session at P51.195 versus the greenback, down 6.5 centavos from its P51.13-per-dollar finish on Thursday.
Week on week, the peso strengthened from the P51.24 finish on June 28.
Michael L. Ricafort, economist at Rizal Commercial Banking Corp., said there is a chance for the local unit to remain relatively stronger against the dollar following a slew of positive economic data in the country such as inflation.
Headline inflation in June stood at 2.7%, its slowest reading in almost two years, due to slower increase in the prices of food and non-alcoholic beverages.
The June result was slower than the 3.2% in May and 5.2% in June 2018, and fell within the 2.2-3% estimate of the Bangko Sentral ng Pilipinas (BSP).
Mr. Ricafort said the lower-than-expected inflation print increases the odds of further easing in monetary policy by the BSP through another cut in interest rates.
“Easing inflation trend and possible further easing of monetary policy would generally be positive for the local financial markets (including the peso)…” he said.
Meanwhile, a market analyst said the dollar will likely recover some of its recent losses on Monday driven by stronger-than-expected jobs data.
The US economy added 224,000 jobs last month, higher than market expectations of 160,000 and the downward-revised 72,000 jobs added the previous month.
Mr. Ricafort said the stronger-than-expected US jobs data could “lead to some healthy upward correction” in the dollar against major currencies.
Towards the end of the week, the market analyst said the greenback is expected to resume declining amid expectations of dovish cues from the US policy meeting minutes and from various US Federal Reserve officials.
“Excepts of the June 2019 US policy meeting might confirm views of a 25-basis-point US rate cut this month in response to muted inflation and growing downside risks to growth,” the analyst added.
For this week, Mr. Ricafort expects the peso to trade between P51.10 and P51.60 versus the dollar, while the market watcher gave a P50.80-P51.40 range. — K.A.N. Vidal