Peso to trade sideways before US data

THE PESO may trade sideways against the dollar this week as market players await the release of key US economic data, which could affect the US Federal Reserve’s policy decision this month.

On Friday, the local unit closed at P59.35 per dollar, rising by 11 centavos from its record-low finish of P59.46 on Thursday, data from the Bankers Association of the Philippines showed.

However, week on week, the peso was down by 10.5 centavos from its P59.245 close on Jan. 9.

“The dollar-peso traded lower on improving global risk sentiment after US President Donald J. Trump softened his tone on Iran, as well as moderate demand for the peso following signals from the BSP (Bangko Sentral ng Pilipinas) that they are taking a measured approach to foreign exchange market intervention,” a trader said in a phone interview on Friday.

BSP Governor Eli M. Remolona, Jr. earlier said that they make “minimal” intervention in the foreign exchange market only to smoothen out sharp swings in the currency.

“There’s tremendous pressure to defend the peso and we’ve resisted that pressure,” he said on Jan. 8.

The peso also rose on Friday amid fresh developments regarding the Fed’s leadership that helped improve sentiment, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar gained on Friday after US President Donald J. Trump praised economic adviser Kevin Hassett at a White House event and said he may want to keep him in his current role, prompting speculation he is less likely to be named as chair of the Federal Reserve, Reuters reported.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.06% to 99.41, with the euro down 0.1% at $1.1594. The index reached a six-week high of 99.49 on Thursday.

The US currency was boosted last week by data showing an improving US labor market, which has pushed back expectations of further Federal Reserve rate cuts until June.

Fed Vice Chair for Supervision Michelle Bowman said on Friday a fragile job market that could weaken quickly means the US central bank should stand ready to cut interest rates again if needed.

For this week, the trader said the peso could move sideways as players await the scheduled releases of US economic data, including reports on gross domestic product, personal consumption expenditures, jobless claims, and manufacturing.

The market could also take cues from developments on the US-Iran talks, the trader added.

Both the trader and Mr. Ricafort see the peso moving between P59.10 and P59.50 per dollar this week. — A.M.C. Sy with Reuters