Peso to trade sideways

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THE PESO could trade sideways this week after the less dovish remarks from the US Federal Reserve chair’s speech last Friday.

Last Friday, the peso ended at P52.27 against the dollar, down by 1.5 centavos from Thursday’s close of P52.255 versus the greenback ahead of US Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole that day.

On a week-on-week basis, the local unit went up 17 centavos from its Aug. 16 close of P52.44 per dollar.

“We’re waiting for the Jackson Hole event. That I think will be the focus of the market. So, for the most part [of last week], wait and see na eh (markets were on a wait-and-see mode). We want to hear more from the Fed as the market is already pricing in an aggressive rate cut. However, we are not sure if the Fed is aligned with the market’s perception,” a currency trader said via phone interview late Friday.

“The Powell speech [last Friday] will dictate the direction of the market this week,” the trader said.

Michael L. Ricafort, economist at Rizal Commercial Banking Corp. (RCBC), said in an e-mail: “The peso could still improve [this week] if Federal Reserve Chairman Jerome Powell provides more dovish signals during his speech at the Jackson Hole annual gathering of central bankers.”

For his part, Robert Dan J. Roces, chief economist at Security Bank Corp., expects the peso to trade sideways this week with an upward bias.

“Players will seek direction post-Jackson Hole events and probably some signals from the G7,” he said in an e-mail.

In his keynote speech in the annual gathering of central bankers in Jackson Hole last Friday, Fed Chair Powell cited the ongoing trade war between the US and China, tension in Hong Kong, and signs of a global economic slowdown as “significant” risks to the economy.

Mr. Powell also said the US economy is in a “favorable place” now and he stressed limits to the Fed’s ability to respond to the trade issues.

He said officials need to “look through” short-term turbulence, and stopped short of endorsing or signaling the pace and depth of rate cuts markets widely expect and that US President Donald J. Trump has demanded.

There are “no recent precedents to guide any policy response to the current situation,” Mr. Powell said, adding that monetary policy “cannot provide a settled rulebook for international trade.”

The Federal Open Market Committee will next meet on Sept. 17-18.

The currency trader sees the peso trading between P52.10 and P52.60 this week.

“However, if we’re going to see an aggressive move lower for the dollar peso [this] week, probably the P52.10 might be breached,” the trader added.

RCBC’s Mr. Ricafort expects peso to trade from P52.00 to P52.50, while Security Bank’s Mr. Roces sees the local unit at around P52.30 to P52.50 this week.

Local financial markets are closed today in observance of the National Heroes Day. — Mark T. Amoguis