Peso may trade sideways versus dollar as markets await US data
THE PHILIPPINE peso could trade sideways against the dollar this week as the market awaits US labor data that could dictate the US Federal Reserve’s next policy move.
It closed at P55.57 a dollar on Friday, strengthening by 25 centavos from Thursday, according to Bankers Association of the Philippines data posted on its website.
This was the peso’s strongest finish in more than two months. Week on week, the currency gained 44.5 centavos.
The peso appreciated on Friday as comments from Fed Chairman Jerome H. Powell stoked expectations of a rate cut, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.
Mr. Powell on Thursday said the US central bank was “not far” from gaining the confidence it needs in falling inflation to begin cutting interest rates, Reuters reported.
“I think we are in the right place,” he told a Senate banking committee hearing. “We are waiting to become more confident that inflation is moving sustainably down to 2%. When we do get that confidence, and we’re not far from it, it will be appropriate to begin to dial back the level of restriction so that we don’t drive the economy into recession.”
The Fed raised borrowing costs by 525 basis points from March 2022 to July 2023 to 5.25-5.5%.
Mr. Powell’s comments had caused the dollar to weaken to one-month lows, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
On Friday, the dollar index shed 0.52% to 102.8.
Mr. Roces expects the peso to trade sideways this week after the release of US nonfarm payroll data for January. Mr. Ricafort said this could signal when the Fed might start its easing cycle.
US job growth quickened in February, but higher unemployment moderate wage gains kept on the table an anticipated interest rate cut in June by the Fed.
Mr. Roces expects the peso to range from P55.50 to P56 as dollar this week, while Mr. Ricafort sees it moving between P55.30 and P55.80.