Peso to climb on weak US data

THE PESO is seen to strengthen against the dollar this week on the back of weaker-than-expected US jobs data as well as bets of upbeat economic growth in the country.
On Friday, the peso moved sideways to P51.675 versus the greenback from Thursday’s P51.67 as investors took profits ahead of the US non-farm payrolls data.
Week on week, the local unit strengthened from its P51.965-per-dollar finish on April 27.
Traders interviewed on Friday said the market will consider in the US jobs data.
The US created 164,000 new jobs in April, the Bureau of Labor Statistics reported late Friday. The figure is lower than the 192,000 expected payroll growth in a Reuters poll but higher than the revised 135,000 new jobs in March.
The unemployment rate, on the other hand, fell to an 18-year low of 3.9% last month.
The “generally downbeat” US labor reports will weigh on the dollar in the first three days of the week, Land Bank of the Philippines (LANDBANK) market economist Guian Angelo S. Dumalagan said, as the currency is expected “to move sideways with a downward bias.”
“Non-farm payrolls and average hourly earnings came out lower than market expectations, even as unemployment rate improved unexpectedly to its best reading since late 2000,” Mr. Dumalagan said in an e-mail.
“Despite these mixed readings, the US Federal Reserve is still widely expected to push through with at least two more rate hikes this year,” he added.
The peso will further strengthen on Thursday as the country’s first-quarter gross domestic product (GDP) print is seen to strengthen and as the Bangko Sentral ng Pilipinas (BSP) is expected to hike interest rates at its policy meeting this week.
The Philippine economy, Mr. Dumalagan said, possibly expanded by 6.9% in the January to March period, faster than the 6.5% growth tallied in the previous quarter but a tad short of the 7.8% government target.
“On the same day as the release of the Philippine GDP growth report, the BSP is also expected to pursue some hawkish moves amid broadening inflation pressures,” the LANDBANK economist said.
A ����ý poll showed nine out of 11 economists expect the monetary authority will hike its benchmark rates during the May 10 Monetary Board meeting after inflation surged to a five-year high in April.
Inflation has been accelerating this year, reaching a five-year high of 4.5% last month under the 2012 base year, preliminary data from the Philippine Statistics Authority showed.
“If [the central bank] does not hike its policy rates by 25 [basis points], the BSP could shift to a significantly more hawkish tone at the very least,” LANDBANK’s market economist said, noting the hike in policy rates might also be accompanied by a cut in the reserve requirement ratio.
However, despite the peso’s expected ascent this week, Mr. Dumalagan said the dollar might recover slightly “fuelled by likely firm US inflation data for April 2018.”
For this week, Mr. Dumalagan sees the peso moving between P51.40 and P51.90 versus the dollar, while the currency trader gave a P51.45-P51.90 forecast range. — Karl Angelo N. Vidal with Reuters