Peso to stay within P49:$1 level ahead of US, EU data

Date issued: April 17, 2017

THE PESO may move sideways this week, but continue to stay within the P49 level against the dollar, as market players remain on the sidelines before the release of key US and Europe area data and caution ahead of the French presidential election this week.

The peso ended at P49.43 versus the greenback on Wednesday, 20.5 centavos stronger from its P49.635 finish on Tuesday.

The market was closed on April 13-14 in observance of Maundy Thursday and Good Friday.

Week on week, the local currency gained 65 centavos from its P50.08 close last April 7.

An economist from a local bank said the peso may move sideways against the greenback this week, falling within P49.20 to P49.60, on the back of possible mixed key US economic data and as investors remain cautious ahead of the French presidential election on April 23.

“The dollar might move sideways this week, with a likely upward bias, as mixed US economic reports and caution ahead of the French presidential election might keep investors on the sidelines,” Land Bank of the Philippines (Landbank) Market Economist Guian Angelo S. Dumalagan said in an e-mail over the weekend.

“While economic and political developments [this] week are expected to provide minimal direction to the dollar, a strong upward dollar correction cannot be ruled out given the dollar’s drastic and unexpected decline last week,” he added.

The dollar may climb against the peso early this week after the US Labor Department reported on Thursday that its producer price index (PPI) for final demand slipped 0.1% last month, the first decline since August. The PPI gained 0.3% in February. Despite last month’s dip in prices, the PPI shot up 2.3% in the 12 months through March. That was the biggest increase since March 2012 and followed a 2.2% jump in February.

US retail sales likewise dropped for two consecutive months in March to 0.2% from a 0.3% decline in February.

In the remaining days of the week, the dollar might recover due to safe-haven buying ahead of the election in France. Investors might focus on political events, as likely mixed US housing reports and potentially steady inflation data of the euro area might provide minimal trading guidance, Mr. Dumalagan said.

He added that the speeches of Boston Fed President Eric Rosengren on April 19 and Fed Governor Jerome Powell on April 20 could cause the dollar to go higher against the local currency, as both officials are expected to deliver hawkish remarks of two more interest rate hikes by year end.

“The factors that could provide the dollar some concrete direction include hints of another US rate hike in June 2017 and potential updates from US President Trump about the scope and timing of his promised tax reforms,” Mr. Dumalagan said.

“Renewed focus on the Philippines’ strong macroeconomic fundamentals might limit any upward dollar correction following last week’s sudden dollar depreciation,” Mr. Dumalagan noted.

Meanwhile, a trader said in a phone interview last Wednesday that the peso may trade between P49 and P49.25 against the dollar this week, with remittance inflows to support the unit. -- JMDS

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