Peso to drop on upbeat US data

THE PESO is expected to slide this week due to positive developments on the US tax bill, as well as the upbeat expectations on third-quarter US economic growth data.

On Friday, the local currency moved sideways against the greenback, gaining 2.5 centavos to close at P50.445, as the market consolidated driven by stronger-than-expected US retail sales data.

Week on week, the peso also ended stronger than its P50.50 close last Dec. 8.

An analyst said the dollar might regain its footing in the coming days as the peso “unexpectedly appreciated” last week following the sovereign credit rating upgrade by Fitch Ratings.

Fitch upgraded its long-term issuer default rating for the Philippines to “BBB” from “BBB-”, assigning a stable outlook, on the back of the country’s strong economic performance, reinforced by the tax reform package which is now awaiting the president’s approval.

“The dollar might rebound as a trend in the next five days amid reports that Republican negotiators in US Congress are already finalizing the US tax bill, increasing the chances of its passage before 2017 ends,” Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (Landbank), said in an e-mail.

Meanwhile, a trader noted that third-quarter US gross domestic product (GDP) growth data to be released later this week is “something to look at.”

“This growth report might help divert investors’ attention back to the latest US policy meeting where policy makers affirmed their view of three rate hikes in 2018 on the back of upwardly revised projections for 2018 growth and inflation,” Mr. Dumalagan noted.

Meanwhile, the Wednesday and Thursday sessions might be favorable for the local unit as expectations on the US housing reports are “mixed.”

“Building permits and housing starts are expected to show weaker readings, while existing home sales, which comprise about 90% of the US housing market, is likely to come out firm,” Landbank’s market economist said.

For this week, traders expect at the peso to move between P50.25 and P50.75, as Mr. Dumalagan noted that “unexpected hawkish moves from Bank of Japan and negative results from GDP growth and tax bill” might reverse the upward trajectory of the dollar. — K.A.N. Vidal