Business World

Peso to weaken on Fed officials’ speeches


THE PESO will likely weaken against the dollar this week due to hawkish speeches from US Federal Reserve officials amid generally mixed US economic data.

The local currency strengthen­ed against the greenback to P51.89 last Friday, 21 centavos stronger compared with the P52.10 logged the previous day, on a continued correction from its plunge early last week. Week-on-week, the peso also ended stronger from its P52-per-dollar finish on Feb. 15.

“The dollar might bounce back this week after last Friday’s drop, supported by likely hawkish speeches from various US Federal Reserve officials,” Guian Angelo S. Dumalagan, market economist of Land Bank of the Philippine­s (Landbank), said in an e-mail.

Mr. Dumalagan said “potentiall­y upbeat” remarks from Fed officials Loretta J. Mester, John C. Williams and James B. Bullard may boost the dollar’s upward move, adding that the officials are expected to affirm views of more US interest rate hikes ahead.

According to Reuters, Mr. Williams said that the Fed should raise its rates “three to four times” this year, adding that the next rate hike should take place in the near future.

However, Mr. Bullard warned central bankers to be more careful in raising the rates too quickly as this could slow down the US economy too much.

“The idea that we need to go 100 basis points in 2018, that seems like a lot to me,” Mr. Bullard said on Thursday

Aside from the potentiall­y bullish speeches, Mr. Dumalagan said “likely firm” US reports on consumer confidence and new home sales would also give a lift to the dollar despite possible weaker US durable goods orders.

On the last two trading days of the week, Mr. Dumalagan said the dollar may experience more volatility as the new Fed Chair Jerome H. Powell, as well as US growth and personal consumptio­n expenditur­es index data, could significan­tly influence expectatio­ns on the US central bank’s future policy moves.

“While these market catalysts are expected to remain supportive of a stronger dollar, the greenback’s appreciati­on might be disrupted by potentiall­y softer to mixed US reports on pending home sales, manufactur­ing, personal spending, and personal income,” he said.

Meanwhile, another trader said that the impact of the trade gap will likely weaken the peso in the short term.

“Fundamenta­lly, you hear from most of the analysts that the weaker peso is due to the trade gap. Eventually, this should be good because the trade gap is because of the high amount of imports we are taking in for capital expenditur­es which will be used for the infrastruc­ture push of the government,” the trader said.

“Having said that, though, the shortterm impact on the peso should still be weaker.”

For today, the trade sees the peso to move between P51.80 and P52.10, while Mr. Dumalagan gave a forecast range of P51.50 to P52.40 for the week. Karl Angelo N. Vidal with Reuters

 ??  ?? THE PESO is expected to drop anew due to likely bullish speeches by Fed officials.
THE PESO is expected to drop anew due to likely bullish speeches by Fed officials.

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