Peso may move sideways vs dollar

The peso may trade sideways against the greenback this week before the release of November inflation data and following comments from the US Federal Reserve chair.

The local currency closed at PHP 55.40 versus the dollar on Friday, appreciating by 8.5 centavos from Thursday’s PHP 55.485 finish, data from the Bankers Association of the Philippines’ website showed.

Week on week, however, the peso inched down by two centavos from its PHP 55.38 close on Nov. 24.

The peso inched up against the dollar on Friday as the Bangko Sentral ng Pilipinas (BSP) said inflation may have eased further in November, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The BSP on Friday said November headline inflation may have settled within the 4-4.8% range. If realized, this would be slower than 4.9% in October and the 8% print in the same month a year ago. 

The low end of the BSP’s November estimate would also match the high end of the central bank’s 2-4% annual inflation target.

The Philippine Statistics Authority will release November inflation data on Tuesday.

The peso was also supported by easing global crude oil prices and US inflation, Mr. Ricafort added.

Improved US personal consumption expenditure (PCE) data could support a pause by the Fed at its next meeting, he said.

Data on Thursday showed US consumer spending rose moderately in October, while the annual increase in inflation was the smallest in more than 2-1/2 years, Reuters reported.

The PCE price index rose 3% in October from a year ago, moderating from a three-month string of 3.4% readings though still above the Fed’s 2% target.

For this week, the peso could trade sideways following comments from Fed Chair Jerome H. Powell and ahead of the release of Philippine November headline inflation data, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

The risks of the Federal Reserve slowing the economy more than necessary have become “more balanced” with those of not moving interest rates high enough to control inflation, Mr. Powell said on Friday, reaffirming the US central bank’s intent to be cautious but also offering fresh optimism on its progress so far, Reuters reported.

As the Fed goes forward, “the data will tell us if we need to do more” rate hikes, Mr. Powell said as he fielded questions from Spelman College President Helene Gayle after his opening remarks at the historically black college.

For this week, Mr. Roces expects the peso to move between PHP 55.30 and PHP 55.80 per dollar, while Mr. Ricafort sees it ranging from PHP 55.10 to PHP 55.60. — A.M.C. Sy with Reuters