Peso to drop as Fed boosts dollar
THE PESO is likely to weaken this week amid an expected recovery for the greenback as traders turn their focus to the possibility of two more US rate hikes this year.
The local currency slid to P50.18 against the dollar on Friday, down six centavos from its P50.12- per- dollar finish on the previous session.
Week on week, however, the peso went up by 18 centavos from its P50.36 a dollar close last March 10.
The market may see a slight recovery of the dollar this week, according to Land Bank of the Philippines Market Economist Guian Angelo S. Dumalagan, “as investors might divert their attention back to prospects of two more rate hikes this year from the Federal Reserve and bets of more fiscal stimulus from the Trump administration.”
However, Mr. Dumalagan said market sentiment would depend on the upcoming G-20 summit in Germany, amid possible disputes on rising protectionism — US President Donald J. Trump’s centerpiece foreign policy rhetoric.
“[I]f financial leaders engage in heated discussions about protectionism during the G- 20 gathering, the greenback could potentially decline further as a result of a likely deterioration in investor optimism,” he said in an e-mail over the weekend.
Sans negative sentiment from the said meeting, the dollar could strengthen from “bargain hunting amid better- than- expected US consumer sentiment,” he added.
Meanwhile, a trader said the market will watch Mr. Trump’s speech set today for possible clues of policies in the US.
“Based on his previous speeches, he gives no specific details. It’s all just blanket statements,” the trader noted.
Moreover, the market will see quiet trading at the start of the week due to light economic data, according to another trader. “We’ll see more of corporate demand,” said the trader, with activity expected to pick up as closer to the Bangko Sentral ng Pilipinas’ Monetary Board’s meeting on Thursday, where the regulator may provide hints on its policy direction.
A trader said the local pair may trade within P50.10 to 50.40, while another sees a tighter range of P50.00 to P50.25 this week. —