Peso may weaken on mixed data

THE PESO is expected to weaken against the dollar this week amid mixed US economic data, although this might be tempered by continued optimism on the benefits of the local tax reform law.

The peso ended at P49.865 versus the greenback last Friday, down 4.5 centavos from its P49.82-per-dollar finish on Thursday, as it failed to sustain its momentum during the morning trading, which peaked at P49.705.

“The dollar might generally recover this week amid bets of stronger US inflation reports, despite possibly some weakness in the first few days of the period,” Guian Angelo S. Dumalagan, market economist of Land Bank of the Philippines (Landbank), said in an e-mail over the weekend.

He attributed the dollar’s possible weakness during Monday and Tuesday trading to the weaker-than-expected December data on US non-farm payrolls.

The US only created 148,000 jobs in December, well below the expectations of 190,000 according to a Reuters survey and the revised November data of 252,000.

The healthcare sector generated the most number of jobs at 31,000, but the retail sector lost 20,000 jobs amid the holiday season.

Mr. Dumalagan noted that the dollar’s decline might be minimal as other employment data met expectations.

“[These include] the jobless rate data, which remained at a 17-year low of 4.1%, and the average hourly earnings data, which showed a healthy growth last month.”

The dollar, meanwhile, will begin to bounce back on Wednesday due to the “expectations of stronger US reports on producer and consumer price inflation” and “softer Philippine data on trade and industrial production.”

However, the greenback’s appreciation might be tempered by “the optimism about the recently passed TRAIN (Tax Reform on Acceleration and Inclusion) law of the Duterte administration,” Mr. Dumalagan said.

Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, added that market players are expecting the impact of the local tax overhaul to come in this week.

For this week, Mr. Asuncion expects the peso to trade between P49.60 and P49.90 versus the dollar, while Landbank’s Mr. Dumalagan gave a slightly wider range of P49.60 to P50. — Karl Angelo N. Vidal