Peso could recover on anemic US factory data

THE PESO is expected to recover against the dollar this week following the release of weakerthan-expected manufacturing data from the US, which raised questions anew on the timing of the anticipated rate hike in the world’s largest economy.

The local unit traded weaker than the dollar on Thursday, closing at P44.52 against the greenback, down 20 centavos from its Wednesday finish of P44.32 versus the foreign currency as profit taking continued to drag on the local unit ahead of the shortened workweek and as market players chose to flee riskier markets due to the growing uncertainty on the pace of the US economy’s recovery.

Thursday’s closing rate was the peso’s weakest in two weeks or since it finished at P44.54 versus the greenback last April 15.

Philippine financial markets were closed on Friday for the Labor Day holiday.

Week on week, the peso was also weaker compared to its P44.245- per- dollar close last April 24.

A trader said peso-dollar trading this week will take direction from the latest US manufacturing data released over the weekend.

“Higher bias on the peso this week as the US manufacturing data turned out weaker than expected,” the trader said.

“Another round of softer data is causing uncertainty on investors on the timing of the rate hike which was earlier seen by June,” the trader added.

MetisEtrade, Inc. analyst Cherica Y. Vicente, for her part, said in an e-mail: “The US manufacturing data could influence pesodollar rates…”

“A weaker-than-expected data will confirm the weakness of the US economic recovery,” she added.

US factory activity failed to gain steam in April after slowing for five straight months and demand for automobiles softened, suggesting the economy was struggling to find momentum after growth almost stalled in the first quarter.

The Institute for Supply Management reported on Friday that its index of national factory activity was 51.5 in April, below the forecast of 52.0, and unchanged from 51.5 recorded in March, which had been the lowest since May 2013.

Another trader said a “choppy trading week” is expected as market awaits for Friday’s US nonfarm payrolls data.

For this week, the first trader said the peso could move within the P44.10- to P44.35-per-dollar band, while the other trader said the exchange rate could range between P44.30 and P44.80. MetisEtrade’s Ms. Vicente said pesodollar rates could be between P44.12 and P44.89. —