Peso may weaken with Fed seen pausing rate cuts

THE PESO could weaken further against the dollar this week as US jobs data bolstered expectations that the US Federal Reserve could choose to pause its easing cycle this month.

On Friday, the local unit closed at P59.245 per dollar, declining by 7.5 centavos from its P59.17 finish on Thursday, data from the Bankers Association of the Philippines showed.

Week on week, the peso fell by 40.4 centavos from its P58.841 close on Jan. 2.

“The dollar-peso moved within a familiar range on cautious trading ahead of the US nonfarm payrolls (NFP) data release,” a trader said in a phone interview on Friday.

The dollar was also generally stronger on Friday due to higher global crude oil prices and as players await the US Supreme Court’s (SC) ruling on the legality of the increased tariffs implemented on Liberation Day, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For this week, the trader said the market will react to the US jobs data released after market hours on Friday.

“There is also a US SC decision on Trump tariffs, so that could be a factor. Market participants will continue to monitor developments with Venezuela,” the trader added.

The trader sees the peso moving between P59 and P59.40 per dollar this week, while Mr. Ricafort expects it to range from P58.90 to P59.40.

The dollar gained on Friday after data showed slower than expected US jobs growth, suggesting the Federal Reserve could leave interest rates unchanged later this month, Reuters reported.

The unemployment rate fell to 4.4% last month from a revised 4.5% in November, the US Labor department reported on Friday, even as employers added 50,000 jobs in the month. Economists polled by Reuters had forecast a gain of 60,000.

The latest job market data appears to give the central bank a bit of breathing room to leave short-term borrowing costs where they are, as Federal Reserve Chair Jerome H. Powell last month signaled policymakers are inclined to do at least in the near term.

Financial markets had been bracing for a possible Supreme Court decision that could strike down President Donald J. Trump’s sweeping tariffs. But the court did not issue that ruling on Friday, though a decision could still come this week.

The US economy added 50,000 jobs in December, according to Labor department data released on Friday. That was lower than an estimated increase of 60,000 jobs forecast by economists in a Reuters poll.

The dollar was up 0.2% to 0.801 against the Swiss franc, headed for the second straight week of gains.

The dollar index rose 0.25% to 99.13 and was set for the second consecutive week of gains.

Fed funds futures are pricing an implied probability of 95% that the central bank holds interest rates at its next two-day meet on Jan. 27-28, up from 68% a month ago, the CME Group’s FedWatch tool shows. — A.M.C. Sy with Reuters