THE PESO is expected to trade sideways against the dollar this week ahead of the release of US economic data that could affect the US Federal Reserve’s next move.
The local currency closed at P55.62 versus the dollar on Friday, weakening by 12 centavos from Thursday’s P55.50 finish, data from the Bankers Association of the Philippines’ website showed.
Week on week, the peso also depreciated by 42 centavos from its P55.20 finish on June 30.
The local unit opened Friday’s session at P55.65 per dollar. Its weakest showing was at P55.67, while its intraday best was at P55.52 against the greenback.
Dollars traded went down to $1.01 billion on Friday from the $1.06 billion recorded on Thursday.
The peso weakened on Friday as investors awaited US employment data released later that day for leads on the Fed’s next move, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The US added fewer jobs than anticipated in June but still-strong wage growth and a slight drop in the unemployment rate will likely keep the Federal Reserve on track to raise interest rates at the upcoming July meeting, Reuters reported.
The 209,000 payroll jobs added in June continued a steady climb down in the pace of hiring from the highs seen in the months when the economy was still reopening from the pandemic.
But it remains above the 183,000 average jobs added per month in the decade before the health crisis, and the steady pace of average hourly earnings gains, stuck around 4.4% on an annual basis since April, was a sign the US remains a seller’s market for workers.
Combined with still-sticky inflation and other data in recent weeks, it is likely to embolden the large majority of Fed officials who feel further rate hikes will be needed — and can be sustained by the economy without causing a major meltdown in employment.
The US central bank paused its tightening cycle last month after hiking rates for 10 straight meetings by a total of 500 basis points (bps), bringing the fed funds rate to a range between 5% and 5.25%.
Fed Chair Jerome H. Powell previously said one or two more 25-bp hikes are possible within the year as stronger-than-expected economic data support further tightening.
The Fed will hold its next policy review on July 25-26.
For this week, Mr. Ricafort said the peso may trade sideways as investors await the release of the June US consumer price index (CPI) report on July 12 and latest US jobless claims data on July 13, as both could affect the Fed’s next move.
The US CPI edged up 0.1% in May as gasoline prices fell, after increasing 0.4% in April. In the 12 months through May, the CPI climbed 4%. That was the smallest year-on-year increase since March 2021 and followed a 4.9% rise in April.
Core CPI increased 0.4% in May, rising by the same margin for the third straight month.
Mr. Ricafort sees the peso trading between P55.30 and P55.80 a dollar this week. — AMCS with Reuters