THE PESO is seen to trade sideways this week as the market awaits developments in the ongoing trade dispute between the world’s two largest economies.
The local unit finished at P52.44 versus the greenback on Friday, 10.5 centavos higher than its previous close, after upbeat July retail sales data in the United States which somehow helped quash market expectations of a possible recession after the inversion of the US Treasury yield curve.
However, on a week-on-week basis, the peso weakened from its P51.88-per-dollar close last Aug. 9.
A trader interviewed by phone last week said the peso will likely recover in the coming weeks as trade talks between US and China resume.
“There is slight optimism given that China would already want to strike a deal but the question remains if the US are gonna meet them halfway,” the trader said.
“This development is good for emerging markets like the Philippines. If there’s optimism, that’s positive for the Philippines,” the trader added.
Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc., offered a less than stellar view on the local currency amid budget balance data scheduled to be released this week.
“The significant economic data release [this] week is the budget balance. The budget deficit is expected to widen as government continues to address its under spending in the first half of 2019. This will put a downward pressure on the peso,” Mr. Asuncion said in an e-mail interview last Friday.
“The uncertainties of the external environment will also contribute to the said weakening view,” he added.
For his part, Michael L. Ricafort, economist at Rizal Commericial Banking Corp. (RCBC), said the peso could regain its footing amid a lower global interest rate environment as well as slowing global economic outlook.
“On positive external factors, lower US/global interest rates and inflation amid slower global economic/outlook recently could somewhat reduce the attractiveness/allure of the US dollar with lower US interest rate returns,” Mr. Ricafort said in a separate e-mail interview.
Analysts expect a wide trading range for the local currency this week.
The trader and RCBC’s Mr. Ricafort expect the peso to trade sideways with a slight strengthening bias, settling between P52.20 and P52.70 versus the dollar, while UnionBank’s Mr. Asuncion sees the local currency ranging from P54.40 to P52.80. — Mark T. Amoguis