THE PESO may trade sideways against the dollar in the coming days ahead of the Bangko Sentral ng Pilipinas (BSP) policy meeting and following mixed US data released last week.
The local unit closed at P57.205 per dollar on Friday, strengthening by 15.5 centavos from its P57.36 finish on Thursday, Bankers Association of the Philippines data showed.
Week on week, however, the peso sank by 91 centavos from its P56.295 finish on Oct. 4.
“The dollar-peso closed lower amid strong selling pressure on profit taking amid dovish comments from US Federal Reserve officials that they will still cut rates despite the higher-than-forecasted inflation rate,” a trader said by phone.
The peso dropped amid retreating US Treasury yields, the trader added.
The US dollar was flat against major currencies on Friday as markets digested a slew of economic data that supported the Federal Reserve’s current monetary policy path, Reuters reported.
A gauge of US producer prices was unchanged in September, the Labor department reported, the latest economic data to indicate the Fed will likely cut rates again next month.
Consumer prices in September rose 0.3%, according to data released on Thursday, slightly hotter than expected, while weekly jobless claims surged, pointing to labor-market weakness.
The dollar index was flat at 102.91, taking a breather after a recent steady climb that took it above 103 on Thursday, its highest since mid-August on the back of traders reducing bets on further jumbo interest-rate cuts by the Federal Reserve at its remaining meetings this year.
Markets are betting a nearly 91% chance of a 25-basis-point (bp) cut at the Fed’s next meeting and 9% probability of no cut, according to the CME’s Fedwatch tool.
For this week, the trader said the US producer price index data released on Friday is likely to drive foreign exchange trading.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the peso will move sideways before the BSP’s policy meeting.
A BusinessWorld poll conducted last week showed that 16 out of the 19 analysts surveyed expect the Monetary Board to reduce rates by 25 bps at its policy meeting on Wednesday (Oct. 16). This would bring the policy rate to 6% from the current 6.25%.
The trader expects the peso to move between P57 and P57.40 per dollar this week, while Mr. Ricafort sees it ranging from P56.90 to P57.40.
Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas told reporters on Friday that the peso has corrected to the P57 level following some overvaluation due to Fed cut expectations.
He added that the local unit could weaken to as low as P60 per dollar in the coming months if Donald J. Trump wins the US presidential elections.
“When Trump became president in 2016, the peso was at P48, by 2020 when he ended his term, we were at P53. So, if you compute the difference… we could reach P60,” he said. “The tariff war will trigger a peso depreciation.” — A.M.C. Sy with Reuters
