Peso likely to weaken vs dollar as geopolitical issues continue

THE PESO is seen to inch lower this week as the dollar is expected to “firm up” amid geopolitical concerns abroad.

On Friday, the peso slid to P52.33 versus the greenback from Thursday’s finish of P52.27 as rising US Treasury yields supported the dollar.

Week on week, the peso also fell from its P52.19 finish on May 11.

In a text message, Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank), said market players may turn to offshore catalysts since “not much is happening this week for local economic data.”

Land Bank of the Philippines (LANDBANK) market economist Guian Angelo S. Dumalagan said the dollar may firm up amid geopolitical concerns involving the US, China, North Korea and Italy.

“Italian politics, which is currently focused on the emerging ruling coalition’s desire to challenge European Union limits on budget deficits, is expected to give the dollar an early boost on Monday,” Mr. Dumalagan said, adding that volatility might be elevated due to the trade negotiations between China and the US.

Reuters reported Sunday that Beijing has agreed to significantly increase the imports of US goods and services.

However, the two largest economies did not indicate whether they would drop or delay their tariff threats involving billions of dollars worth of commodities, sparking fears of a wider trade war.

Towards the end of the week, Mr. Dumalagan said the dollar might appreciate due to US data on manufacturing and services. Mr. Dumalagan said this will be “supportive of hawkish US policy meeting minutes” as well as likely upbeat speeches from US Federal Reserve officials Neel Kashkari and William C. Dudley.

“Dovish expectations on [European Central Bank] monetary policy could emanate from likely weaker euro zone reports on manufacturing and services,” Mr. Dumalagan noted.

However, the dollar’s strength will likely slow on Friday afternoon as investors might take profit.

For this week, UnionBank’s Mr. Asuncion sees the peso moving between P52.10 and P52.50, while LANDBANK’s Mr. Dumalagan gave a wider P51.80-P52.50 range.

“The main factors that could reverse the dollar’s projected strength this week include unexpected hints from the [Bangko Sentral ng Pilipinas] of more rate hikes this year, weaker- thanexpected US data on manufacturing and services, any surprising dovish comments from US Federal Reserve officials, and easing geopolitical concerns abroad,” Mr. Dumalagan noted.