THE PESO may strengthen versus the greenback this week on expectations of upbeat remittance data and as the market awaits more signals from the US Federal Reserve on the timing of its tapering.
The local unit closed P50.58 per dollar on Friday, depreciating by two centavos from its P50.56 finish on Thursday, data from the Bankers Association of the Philippines showed.
Still, the peso strengthened by 21 centavos from its P50.79 close on Oct. 1.
The peso depreciated on Friday due to safe-haven demand for the dollar amid rising oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.
Reuters reported that fuel prices increased nearly 5% last week after some industries started switching to oil from gas amid uncertainty whether the US government would release oil from its strategic reserves.
Brent crude futures jumped $1.07 or 1.3% to $83.02 a barrel by 0643 GMT on Friday, while US West Texas Intermediate crude futures rose $1.11 or 1.4% to $79.41 per barrel.
Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said market sentiment improved last week following the release of data showing slower inflation in September.
The consumer price index rose by 4.8% in September, easing from the 4.9% logged in August but faster than the 2.3% print recorded in the same month last year, the Philippine Statistics Authority reported last week.
Headline inflation averaged at 4.5% for the nine months through September, still above the 2-4% target and 4.4% forecast of the Bangko Sentral ng Pilipinas (BSP) for this year.
For this week, Mr. Ricafort said remittance data will affect market sentiment. August remittance data will be released by the central bank on Friday, Oct. 15.
Cash remittances increased 2.5% year on year in July to $2.853 billion. This was the highest monthly inflow since the $2.89 billion logged in December 2020.
This brought inflows for the first seven months to $17.771 billion, up by 5.8% from the same period in 2020. The BSP expects cash remittances to grow by 6% this year.
Meanwhile, Mr. Asuncion said investors will also be looking for leads from the minutes of the previous Federal Open Market Committee (FOMC) policy review, which will be released on Thursday.
The Fed last month kept its policy settings unchanged, although officials signaled that they may start reducing asset purchases as soon as November.
For this week, Mr. Ricafort expects the local unit to move within P50.30 to P50.80 per dollar, while Mr. Asuncion gave a forecast range of P50.40 to P50.90. — Luz Wendy T. Noble with Reuters