Peso likely to rise on weak US data

THE PESO could appreciate this week as the dollar loses steam on the back of disappointing jobs data in the United States, which could dampen expectations of economic recovery and a looming rate hike from the Federal Reserve.

The local unit closed at P51.15 versus the greenback on Friday, down 14 centavos from Thursday’s P51.05 finish. Week on week, the dollar traded weaker from the P50.815 rate logged on Sept. 29.

Traders interviewed over the weekend said the peso could see some lift this week as market players react to weak jobs data in the US, which saw 33,000 workers displaced in September.

“In the first few days of the week, the dollar might depreciate, after the US economy subtracted jobs in September 2017 as a result of the two hurricanes that hit the US, Irma and Harvey,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines.

The US Labor Department said nonfarm payrolls dropped by 33,000 jobs last month, posting the first decline in seven years as twin hurricanes that hit the country led to temporary unemployment or delayed hiring, particularly in the leisure and hospitality sector.

The department said Harvey and Irma, which wreaked havoc in Texas and Florida in late August and early September, reduced employment last month. But underlying details of the closely watched employment report were upbeat. The unemployment rate hit a more than 16-1/2-year low of 4.2% and annual wage growth accelerated to 2.9%.

Mr. Dumalagan noted that a potential acceleration in Philippine manufacturing could also “boost the peso’s appeal,” but noted that improving joblessness rate and wage growth in the US could clip the dollar’s losses.

Back home, the Philippine Statistics Authority will report factory output for August on Tuesday.

A second trader said that the dollar will likely drop on the back of disappointing non- farm payrolls data last Friday, which came despite good figures on private employment and non-manufacturing data released last week.

“The non-farm payrolls report will dictate the movement of the foreign exchange market–the dollar in particular. If it’s super weak, we will see a sell-off,” the trader said.

Friday’s session remained relatively quiet with dollars traded at just $498.8 million, which reflected a wait-and-see stance taken by market players ahead of the crucial jobs report.

Strong labor figures would bolster the decision of the US Fed to raise interest rates for a third time this year, while a disappointing turnout may halt such plans.

Mr. Dumalagan expects the peso to range between P50.90 and P51.30 per dollar by Monday, noting that potentially upbeat inflation data in the US coupled with a “likely hawkish tone” of the Fed minutes to be released within the week to lend some strength to the foreign currency.

On the other hand, the second trader sees the peso trading between P50.90 and P51.25.