Peso to move sideways as investors await Fed pick

THE PESO is seen to move sideways this week as the market keeps a close eye on US President Donald J. Trump’s tax-cut plans, as well as his pick for the top position at the Federal Reserve Board.

The local currency closed at P51.45 against the greenback on Friday from the 11-year low finish of P51.53 the previous day due to profit taking.

Week on week, the peso shed six centavos from the P51.39 per dollar recorded on Oct. 13.

Traders said investors are expected to stay on the sidelines, as they await US legislators’ next move on Mr. Trump’s tax reform plans, following its go-ahead of the budget blueprint.

“The markets might wait and see first on Trump’s tax reform,” a trader said in a phone interview on Friday.

Another trader said the markets will take on a wait-and-see stance this week, as investors look to see who Mr. Trump will nominate as Janet Yellen’s replacement when she steps down in February.

“Most likely markets are now looking at who will Trump choose as Fed chair,” he said.

US news reports indicated Mr. Trump considers Stanford University economist John Taylor and Federal Reserve Governor Jerome Powell as the top contenders, but also did not rule out the possibility of reappointing Ms. Yellen.

The trader said the new Fed leadership is expected to have an effect on whether the policy tightening in December would push through or not.

“Picking Powell may be a dollar strength, but only from a knee-jerk reaction since he supports the gradual rate hike, and decision will be related to expected on US inflation. So if it is still subdued, then they may not hike as much as expected,” the trader added.

Guian Angelo S. Dumalagan, market economist of the Land Bank of the Philippines, however, said the peso may strengthen this week over likely soft US economic data, as well as possibly hawkish moves from the European Central Bank (ECB).

“Starting Wednesday, the dollar might begin to depreciate, as investors begin to absorb possibly weak US reports on services and durable goods orders as well as potentially hawkish moves from the ECB regarding the tapering of its bond-buying program,” Mr. Dumalagan said in an e-mail over the weekend.

“The dollar might also fall due to caution ahead of the US third-quarter GDP (gross domestic product) growth data. The depreciation of the greenback might be tempered by likely upbeat remarks from [Federal Reserve Bank of Minneapolis President Neel] Kashkari and possibly stronger US manufacturing data,” he added.

Traders see a P51.30 to P51.60 per dollar range this week, while Mr. Dumalagan forecasts the peso to trade between P51.15 to P51.55 versus the greenback. — Elijah Joseph C. Tubayan