Peso likely to weaken against dollar this week
THE PESO might trade weaker versus the dollar this week, as markets grow more certain of a fresh rate hike in the United States on the back of good jobs data released over the weekend, and with investors also waiting for results of the French presidential elections.
The peso ended at P49.91 on Friday, slipping from its P49.87 finish the previous day and logged the weakest since Wednesday’s P49.95-to-a-dollar level.
Week on week, the peso slightly appreciated coming from a P49.95 finish on April 27, the last trading day before the long weekend.
Two traders said the local unit could depreciate as trading resumes today given “event risks” which would likely affect market sentiment towards emerging market currencies.
“From Monday until Thursday, the dollar might appreciate, as more investors might be betting on a US rate hike in June 2017 as a result of last month’s higher-thanexpected US nonfarm payrolls and lower-than-estimated US unemployment rate, which dipped to a new 10-year low,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines.
“The dollar’s ascent, however, might be partly offset by easing political concerns in France, a development which could reduce the dollar’s safe-haven appeal. In particular, the likely win of pro-EU (European Union) candidate Emmanuel Macron could soothe worries over the potential breakdown of the EU.”
The US government reported on Friday that nonfarm payrolls jumped by 211,000 jobs in April, higher than the 185,000 expected by the market, according to Reuters. Joblessness also dropped to 4.4% last month.
Strong labor figures would strengthen the decision of the US Federal Reserve to raise interest rates in its future meeting.
With the strong job creation outturn, analysts now expect a stronger chance of another “lift- off” come the Fed’s June 13-14 meeting after it kept rates steady during last week’s review. Fed chair Janet L. Yellen said the disappointing growth of the US economy during the first quarter was “transitory,” signalling optimism that the recovery will pick up in the coming months.
Also considered a key event is the presidential elections in France, with centrist candidate Emmanuel Macron seen keeping a wide lead versus far-right Marine Le Pen based on opinion polls a day before the May 7 vote.
“The market is positioned for a Macron win. But over the past year, we’ve seen the Brexit and a Trump win – scenarios where the markets were wrong. If we see Le Pen win over the weekend, there might be a risk-off response,” a second trader said during a phone interview.
To recall, global markets saw heightened volatility in 2016 after a surprise vote for the United Kingdom to leave the European Union in June, followed by US President Donald J. Trump’s victory during the November elections.
For the week, Mr. Dumalagan expects the peso to trade between P49.80 and P50.20 versus the greenback, while the second trader sees a narrower range at P49.85 to P50.10.