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Peso seen sideways after BSP hike

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THE PESO will likely move sideways against the dollar this week following the aggressive policy tightening of the local central bank and amid trade developments in the United States.

On Friday, the local unit recovered further to close at P54.02 versus the greenback, stronger than the P54.23 tallied the previous day.

Week on week, the peso also strengthened a tad from Sept. 21’s P54.04-per-dollar finish.

A foreign exchange trader said investors will wait for the trade developments in the US.

Land Bank of the Philippines market economist Guian Angelo S. Dumalagan concurred, saying the greenback might shed some of its gains in the first two days of the week amid expectations that the US and Canada would arrive at mutually accepted terms under the new North American Free Trade Agreement (NAFTA).

Ottawa and Washington on Saturday narrowed their differences in talks to save the NAFTA ahead of the Sept. 30 deadline, Reuters reported. However, there is no guarantee an agreement will be forged.

“This positive development could temper the dollar’s safe-haven appeal, helping the peso gain further momentum following last week’s 50 basis point (bp) hike by the BSP (Bangko Sentral ng Pilipinas),” Mr. Dumalagan added.

The BSP fired off another strong policy action on Thursday as it increased its benchmark rates by 50 bps to a nine-year high to temper elevated prices and lend support to the weakening peso.

“I think the BSP rate hike is still going to be the driver rather than the global [developments],” the trader added.

For the rest of the week, Mr. Dumalagan said the dollar might bounce back due to likely upbeat US labor reports and expectations of more hawkish comments from various US policy makers.

“US employment data are likely to remain firm, supporting views of more US rate hikes ahead,” he added.

On the local front, the chief economist noted the local inflation report may strengthen the greenback by fuelling investors’ appetite for safer currencies such as the dollar.

For this week, the trader expects the peso to trade between P53.80 and P54.20, while Mr. Dumalagan gave a wider P53.70-P54.30 range. — Karl Angelo N. Vidal