Peso advances against dollar as market waits for key US data

The peso rose on Monday amid broad dollar weakness as the market awaits key economic data releases.

The local unit closed at P58.11 per dollar on Monday, strengthening by eight centavos from its P58.19 finish on Friday, Bankers Association of the Philippines data showed.

The peso opened Monday’s session slightly stronger at P58.18 against the dollar. Its intraday best was at P58.06, while its weakest showing was at P58.20 versus the greenback.

Dollars exchanged plunged to $791.5 million on Monday from $1.38 billion on Friday.

The peso was supported by a generally weaker dollar as the market awaited key economic data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The peso gained from profit-taking after hitting the year lows last Friday and fewer dollar transactions due to a US federal holiday today,” a trader added in an e-mail on Monday.

The dollar held steady on Monday, but was set for its first monthly loss this year, as investors were focused on US, European and Japanese inflation data to guide the global interest rate outlook, Reuters reported.

Foreign exchange trade has been dominated by the hunt for “carry” in recent months, punishing low-yield currencies and supporting the dollar, while US data has blown hot and cold and dented policy makers’ confidence on the rates outlook.

Trading on Monday was thinned out by holidays in Britain and the United States.

Friday’s reading for the US core personal consumption expenditures price index, the Federal Reserve’s preferred inflation measure, is expected to be steady month-on-month.

The dollar had fallen back after data showed a slowdown in consumer price rises in April and confirming the trend could pull it lower still — but the big picture is that inflation and inflation indicators remain above the Fed’s 2% target.

The dollar index, which measures the performance of the US currency against six others, was last down modestly at 104.71. It is on track for a drop of 1.5% in May, the most in one month since December.

The yen may seal its first monthly gain of the year this month thanks to suspected intervention from Japanese authorities towards the end of April and at the start of May, but it has been slipping back since then.

It was steady at 156.88 to the dollar on Monday but has won little support from rising Japanese government bond yields — at the 10-year tenor, for example, they remain nearly 350 basis points below US yields.

For Tuesday, the trader said the peso could weaken anew due to hawkish remarks from US Federal Reserve officials.

The trader sees the peso moving between P57.95 and P58.20 on Tuesday, while Mr. Ricafort expects the peso to range from P58 to P58.20 per dollar. — AMCS with Reuters