Peso seen to strengthen vs dollar this week

THE PESO is expected to strengthen further this week as the dollar will likely depreciate on expected dovish remarks from Federal Reserve (Fed) officials and potentially weaker US economic data.

The local unit ended last week at P52.07 versus the greenback, up 17 centavos from the previous close of P52.24, as investors took cue from the Bangko Sentral ng Pilipinas on inflation’s downward trajectory.

Week-on-week, the peso also strengthened from the P52.21-perdollar finish last Feb. 1.

A market analyst said the dollar is expected to generally depreciate this week, although it may initially strengthen as investors might park their funds on safer currencies such as the greenback amid fears of a global economic growth slowdown.

“Recently, the European Commission trimmed its growth outlook for the eurozone economy to 1.3% in 2019 from 1.9% last year. Growth is expected to remain below the 2017 level until next year, when the economy is seen to expand by 1.6%,” the analyst said in an e-mail, adding that the lingering trade dispute between the US and China may keep demand for safe havens strong.

Trade talks between the world’s two largest economies will resume this week in Beijing, days before the March 1 deadline of its 90-day truce.

Towards the end of the week, the analyst said the peso is seen to recover, with the dollar shedding its initial gains on the back of expected dovish statements from US central bank officials and weak economic data.

The policy makers will likely amplify the central bank views communicated during its latest policy meeting, as Fed officials Jerome Powell, Michelle Bowman, Esther George and Loretta Mester are expected to reiterate the need to take a cautious approach to monetary policy due to signs of slowing growth.

Last month, the Fed opted to keep its borrowing costs stable, saying it will be more patient in raising interest rates amid conflicting signals on the US economic outlook.

“Supporting this dovish view, US consumer and producer price inflation reports for January 2019 are expected to show weaker readings,” the analyst added.

Meanwhile, a foreign exchange trader said on Friday the peso will “remain strong” this week, as market players await for the local trade data.

According to latest data, the country’s trade deficit narrowed in November to $3.9 billion from the record high of $4.08 billion in October, given that imports grew at a slower pace even as exports shrank.

Forthisweek,theanalystexpects the peso to trade between P51.70 and P52.40, while the trader gave a slimmer P51.90-P52.20 range.